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IRA tax question
Old 08-19-2018, 11:46 AM   #1
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IRA tax question

If I purchase an annuity, for say, $100,000, am I taxed on that amount of money or the monthlyincome generated by annuity payments?
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Old 08-19-2018, 11:56 AM   #2
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If the IRA is a traditional IRA consisting entirely of pre-tax contributions and earnings thereon, everything you withdraw will be reported as taxable income on your return. Whether you pay tax on that depends on your entire tax return. But that has nothing to do with the annuity.
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Old 08-19-2018, 01:28 PM   #3
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If the annuity is within an non-deductible tIRA then all annuity benefits received would be taxable.... if in a taxable account then there is a formula for the taxable portion... essentially just the interest.
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Old 08-19-2018, 01:55 PM   #4
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https://www.investopedia.com/terms/q...ed-annuity.asp

Is the annuity qualified or non-qualified? If you bought the annuity within the TIRA with pre-tax funds, it is qualified and income that comes to you is withdrawn from the IRA and is taxed.

If you withdrew the 100K from the IRA to purchase the annuity, it is non-qualified and you would pay tax on that withdrawal as well as any income from the annuity.
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Old 08-19-2018, 04:09 PM   #5
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Originally Posted by kaneohe View Post
..... If you withdrew the 100K from the IRA to purchase the annuity, it is non-qualified and you would pay tax on that withdrawal as well as any income from the annuity.
+ in most situtions it would be a very bad move tax wise and push you into a higher tax bracket.
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Old 08-19-2018, 05:20 PM   #6
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Is this not true? I am really confused:


Q. If I decide to roll over my IRA, 401(k), or lump sum pension payment into an annuity, will I be hit with a distribution tax?
A. NO. The reason you're permitted to roll over these payments into an annuity tax-free is because when you buy an annuity with IRA or 401k money the first thing the insurance company does is create an IRA holding account to receive your transferred funds.
So really buying an annuity with IRA money is the same as moving your money from its current IRA or 401k trustee to another IRA trustee. This kind of transaction is considered a "direct transfer" or a "direct rollover" which is tax-free. You will owe taxes on the monthly income you receive but not on the transfer.
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Is this not true?
Old 08-19-2018, 05:21 PM   #7
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Is this not true?

Now I am really confused:

Q. If I decide to roll over my IRA, 401(k), or lump sum pension payment into an annuity, will I be hit with a distribution tax?
A. NO. The reason you're permitted to roll over these payments into an annuity tax-free is because when you buy an annuity with IRA or 401k money the first thing the insurance company does is create an IRA holding account to receive your transferred funds.
So really buying an annuity with IRA money is the same as moving your money from its current IRA or 401k trustee to another IRA trustee. This kind of transaction is considered a "direct transfer" or a "direct rollover" which is tax-free. You will owe taxes on the monthly income you receive but not on the transfer.
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Old 08-19-2018, 06:11 PM   #8
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What funds can I use to purchase an annuity, and am I permitted to use funds from multiple accounts?

perhaps this article will help. It depends on how you transfer funds to purchase the annuity. To me , it seems like the equivalent of a direct transfer or rollover will preserve the tax-deferred nature of account and keep the annuity qualified.
If you do an indirect rollover, then the annuity will be non-qualified . The article mentions the term 1035 exchange to keep the annuity qualified. You can ask the annuity company how to do that. During the transfer you should not be able to get hold of the funds to put into your own account.
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Old 08-19-2018, 06:36 PM   #9
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Quote:
Originally Posted by LXEX55 View Post
Is this not true? I am really confused:


Q. If I decide to roll over my IRA, 401(k), or lump sum pension payment into an annuity, will I be hit with a distribution tax?
A. NO. The reason you're permitted to roll over these payments into an annuity tax-free is because when you buy an annuity with IRA or 401k money the first thing the insurance company does is create an IRA holding account to receive your transferred funds.
So really buying an annuity with IRA money is the same as moving your money from its current IRA or 401k trustee to another IRA trustee. This kind of transaction is considered a "direct transfer" or a "direct rollover" which is tax-free. You will owe taxes on the monthly income you receive but not on the transfer.
Why would you be confused?.... a number of us told you that if the annuity was purcuased within a tax-deductible tIRA that the annuity benefits would be taxable.... consistent with the conclusion in the last sentence.

What is described can be accomplished by having and existing tIRA at a brokerage purchase an annuity or by transferring the money to an insurer to a qualified annuity account.
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