Question

Colleen purchased an annuity on January 1, 2019 for the amount of $10,000. The selling agent...

Colleen purchased an annuity on January 1, 2019 for the amount of $10,000. The selling agent advised her that she would receive a total of $200 per month for a total of $24,000 based on her life expectancy. What amount may colleen EXCLUDE (if any) from her 2019 income?

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Answer #1

If an annuity is funded with money on which no taxes have been previously paid, then it’s considered a qualified annuity. Typically, these annuities are funded with money from 401(k)s or other tax-deferred retirement accounts, such as IRAs.

When you receive payments from a qualified annuity, those payments are fully taxable as income. That’s because no taxes have been paid on that money. But annuities purchased with a Roth IRA or Roth 401(k) are completely tax free if certain requirements are met.

Assuming that, Colleen as purchased the annuity for qualified annuity. Hence an amount of Annuity purchase $10,000 is exclude from 2019 income.  

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