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IRS Eliminates 2024 RMDs for IRA Beneficiaries Subject to 10-Year Rule

IRS Eliminates 2024 RMDs for IRA Beneficiaries Subject to 10-Year Rule

IRS Notice 2024-35 eliminates 2024 required minimum distributions (RMD) for beneficiaries that would have otherwise been required to take one under the SECURE Act of 2019’s 10-year rule.

The 10-year rule requires non-eligible designated beneficiaries who inherited the IRA when the account holder died after Jan. 1, 2020, to distribute or withdraw the entire balance of the account by the end of the 10th year following the original owner's death.

Proposed regulations cause more confusion

The IRS proposed regulations for RMD changes contained in the SECURE Act of 2019 stated that in addition to the 10-year rule, annual RMDs would be required in years one through nine of the 10-year period if the IRA owner had died on or after the date their RMDs were required to begin. The requirements were met with confusion and criticism. In response, the IRS previously waived 2021, 2022, and 2023 annual RMDs for beneficiaries of IRA owners who passed in 2020 after their required beginning date (RBD) (generally April 1 of the year the owner turns 73). RMDs were also waived for 2022 and 2023 for beneficiaries who inherited in 2021 or 2022 after the owner’s RBD.

The absence of a final rule causes plenty of confusion regarding the treatment of RMDs and the application of the 10-year rule. Notice 2024-35 also suggests that the IRS may be ready to finalize its proposed rules from February 2022 later this year.

The bottom line

The recent notice extends the relief within the 10-year payout period even further by waiving 2024 annual RMDs for beneficiaries of IRA holders who died in 2020, 2021, 2022, or 2023 after their RBD. Non-eligible designated beneficiaries who inherited after 2019 are not required to take RMDs for any year before 2025. It’s important to note that distributions and withdrawals increase income, creating a larger tax bill, so it may be wise to take distributions voluntarily while still in a favorable tax environment.

The SECURE Act of 2019 and SECURE Act 2.0 have made significant changes to retirement planning, and corresponding guidance from the IRS can be complex and, at times, overwhelming. Fill out the form on this page to connect with a qualified tax professional to discuss how any of the recent changes may impact your tax liability.



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