Question

Renew an annuity

Forum|Forum|6 years ago
February 18, 2020
1 reply
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Hello, I am planning for 2020 tax year and I have a question about annuity.

I bought an 5-year term annuity and it will be matured in June 2020. This is not an IRA but I bought it with my personal saving account. I planned to renew this annuity to another 5 years term with the original fund and those interest from the previous 5 year earning.

I like to know, since I renew this annuity with the full fund (original $$ and earned interest $$), Do I need to pay tax on those earning $$ that I reinvest to the next 5 years term?

Thank you

D

dkandcar

I rolled over a matured 14 year annuity (not an IRA) into a new 10 year annuity and received my first annual withdrawal in Nov 2019. Interest has been earned over the 14 years and I need to know how much of the annual payments is taxable.

D

DesertLawnAuthor

Hello,

When you rollover the 14th year annuity to a 10 year annuity, I assumed you rollover both principal and interest earned. At that time, do you need to pay tax for the interest you earned for those 14 years? OR it was a tax referred?

Thanks

J

JulieS

That depends on how your agent sets up the transaction.

If the transaction is structured as a Section 1035 exchange, the entire amount is nontaxable. You will receive a 1099-R, but it will show no taxable income and have code 6 in box 7.

If you don't set it up as a Section 1035 exchange, the interest earned from the original annuity will taxable to you.

Click here to learn more.

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