Page 11 - Supplement to Income Tax TY2021

Recent Tax Developments*

figure your RMD for 2022. Under the current (pre- A surviving spouse beneficiary who does not elect
2022) table, the distribution period at age 75 would to treat the IRA as his or her own can always use
have been 22.9 years. the life expectancy method (a surviving spouse is
Your first traditional IRA RMD will be the 2022 an eligible designated beneficiary under (2) above),
RMD if you will reach age 72 during 2022. You will and in using the Single Life Expectancy Table is
use the Uniform Lifetime Table to figure your RMDs allowed to recalculate life expectancy every year,
regardless of who your beneficiary is, unless your based on attained age. To figure the RMD for 2022,
spouse is your sole IRA beneficiary and your spouse is a surviving spouse will use the life expectancy shown
more than 10 years younger than you (in which case in the new table for his or her age. For example, a
the Joint Life and Last Survivor Table is used). Under surviving spouse beneficiary who is age 75 in 2022
the new Uniform Lifetime Table, the distribution will use a life expectancy of 14.8 years under the
period for a 72-year-old is 27.4 years, as opposed new table; under the current table, it would have
to 25.6 years under the current table (Table 8-3, been 13.4 years.
page 240). Keep in mind that the Uniform Lifetime Reset rule for nonspouse beneficiaries. For
Table provides a “distribution period” that reflects nonspouse beneficiaries allowed to use the life
the joint life and last survivor expectancy of you and expectancy method under (1) or (2) above, a one-
a hypothetical beneficiary who is exactly 10 years time “reset” rule will be used to determine single life
younger than you, regardless of your beneficiary’s expectancy for 2022. Keep in mind that for nonspouse
actual age. If you are age 72 in 2022 and your IRA beneficiaries, the initial single life expectancy for
balance on December 31, 2021, is $200,000, your the first RMD year is reduced by 1 year in each
RMD for 2022 will be $7,299: $200,000/27.4. If the subsequent year. The effect of the “reset” rule is to
table had not been revised, the 2022 RMD would apply the same reduced life expectancy for 2022 that
have been $7,813 $200,000/25.6. would have applied if the initial life expectancy had
Joint Life and Last Survivor Expectancy Table been determined under the new table rather than
(Table 8-4). You use this table instead of the Uniform under the current (pre-2022) table.
Lifetime Table if your spouse is your sole beneficiary Here is an example of how the reset rule will work.
and is more than 10 years younger than you. The joint Assume a traditional IRA owner died in 2019 at age
life and last survivor life expectancy depends on your 80 and her designated beneficiary was her 75-year-
respective ages. For example, if on your birthday in old sister. The beneficiary’s first RMD year was 2020,
2022 you are age 72 and your spouse on his or her the year after the year of the owner’s death. In 2020,
birthday is age 60, the new table provides a joint life the sister/beneficiary was age 76, and under the pre-
and last survivor life expectancy of 28.8 years. Under 2022 Single Life Expectancy Table (Table 8-5, page
the current table (Table 8-4, page 241), the joint life 245), life expectancy of a 76-year-old was 12.7 years.
and last survivor life expectancy for ages 72 and 60 For 2021, the initial life expectancy of 12.7 years is
would be 27.0 years. reduced by 1 year, to 11.7 years. Thus, the sister’s
2021 RMD is figured by dividing the account balance
Single Life Expectancy Table (Table 8-5). You can at the end of 2020 by 11.7. The fact that the CARES
figure RMDs over your life expectancy if: Act waived RMDs for 2020 does not matter; whether

(1) you are the original designated beneficiary of or not the sister took a distribution in 2020, her life
a traditional IRA owner who died before 2020 expectancy for 2021 RMD purposes is reduced from
(8.14), or
(2) you are an “eligible designated beneficiary” 12.7 years to 11.7 years.
(EDB) of a traditional IRA owner (8.15) who If the life expectancy table had not been changed,
died after 2019 or a Roth IRA owner (8.26) the sister’s life expectancy for 2022 would have been
who died after 2019. reduced from 11.7 years to 10.7 years. However, the

Supplement to J.K. Lasser’s Your Income Tax 2021 | 9