Question

Annuity distribution taxable amount

Forum|Forum|3 years ago
April 17, 2023
1 reply
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I opened an variable annuity account in the amount of $56,000 in 2013 Over the years I have taken taxable distributions of approximately $20,000. In 2022 I took a distribution in the amount of $10,000 which the 1099-R in box 2a has the amount of 8470.73. But the annuity only had a value of just over $50,000 at the time of the distribution. I just cannot reconcile the fact that all the distributions over all those years were taxable and now the contract is less than what the starting value was and yet there is still a taxable amount. I used the simplified method of calculating the taxable amount and turbo tax is telling me that none of it is taxable and yet the amount of 8,470.73 is showing up in the final review. Is this correct or is there something i am doing wrong in the program?

M

Mike9241

for a qualified annuity

under the simplified method the tax free portion of each monthly payment is calculated by dividing the plan cost by the number of monthly payments (using either the single life annuity table (only one annuitant) or multiple lives annuity table (multiple annuitants) to be received based on the age (or sum of the ages if multiple annuitants) on the annuity starting date.

so if investment was $16000 and the age on the the annuity starting date for one annuitant was 71 or older the factor would be 160 which means $100 of each monthly payment would be tax free

for a nonqualified annuity a special rule for a variable annuity under the general rule must be used. the simplified rule can not be used.

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we can't see your tax return or the annuity contract. variable annuities in general can gain or lose money (that's why the "variable" in the contract type). some may have a guaranteed minimum return others may not.

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