Maryland Pension Exclusion
Client received RMDs from a Traditional IRA that should go on Maryland Worksheet 13A ‘Pension Exclusion Computation Worksheet.’ This is a Rollover IRA that qualifies, since every dollar came entirely from a 401(K).
The Rollover IRA Exception:
Starting in tax year 2022, Maryland passed a bill (Senate Bill 123) that allows a Rollover IRA to qualify for the pension exclusion, but only under a zero-tolerance condition: [1] The 100% Rule: Every single dollar in that Rollover IRA must have come entirely from an eligible "employee retirement system" (such as a 401(k), 403(b), or defined-benefit pension plan). [1]
However, there is no place in Lacerte to tell it that this is a Rollover IRA that qualifies. If I unclick the IRA box in the 1099-R input screen, that triggers the Maryland Worksheet 13A but then the IRS Form 8606 disappears, so this is not a solution.
What is the solution?
