Illinois 1099-R Life Insurance

Forum|Forum|2 years ago
April 14, 2024
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I have 1099-R with code 7 in box 7 for Normal Distribution from Northwestern Mutual Insurance. We had a loan against the Life insurance policy and it lapsed so they sent us the 1099-R. Is this taxable or exempt from Illinois income?

Best answer by Mike9241

it is not a retirement distribution so it is taxable in Illinois.

only the following is exempt

Line 27 — Payment of life insurance, endowment, or annuity benefits received. Enter the amount of payment of life insurance, endowment, or annuity benefits received before the time they would have ordinarily
been paid as an indemnity for a terminal illness. .

items exempt are listed in PUB 101

https://tax.illinois.gov/content/dam/soi/en/web/tax/research/publications/pubs/documents/pub-101.pdf

mglauner

The income reported on your 1099-R with Code 7 is normally taxable income, reported on your Federal return.

A 1099-R reporting a distribution for a lapsed insurance loan usually has Code L in Box 7 and is taxable income.

Illinois allows you to exclude most retirement income reported on your Federal return in the state interview, so your 1099-R may not be taxable.

Here's more info on Is Life Insurance Taxable?

gjg9981Author

The "state interview" in TurboTax was not clear. It left the amount blank when it asked for any amounts to enter that could be exempt. But I thought TurboTax would have pre-filled in the amount if it knew it was exempt in Illinois. I should assume it's not exempt? ... I'm looking for a definitive answer whether or not this is taxable in Illlinois.

Any answers?

Mike9241Answer

it is not a retirement distribution so it is taxable in Illinois.

only the following is exempt

items exempt are listed in PUB 101

https://tax.illinois.gov/content/dam/soi/en/web/tax/research/publications/pubs/documents/pub-101.pdf