These Deferred Annuity Mistakes Can Be Taxing
- 360 Degrees of Financial Literacy
- Jun 9, 2017
- 1 min read
Note this article's original audience is Certified Public Accountants. That's right many CPAs are not even well versed in the intricate details of retirement account taxation. This is a valuable 120 second read that gives you a little bit of an edge when exploring options with your financial team. Article: The tax treatment of nonqualified deferred annuities (annuities that are not part of a tax-qualified plan such as an IRA or 401(k)) appears to be fairly clear-cut: Earnings aren't taxed until they're withdrawn, a distribution that represents a return of your investment in the contract is not taxed, earnings are taxed as ordinary income and not capital gains, a distribution of earnings taken before age 59½ is subject to a 10% tax penalty unless an exception applies. Simple, right? Yes--except for those particular circumstances that trigger unexpected tax consequences.Ownership by a "non-natural entity""Non-natural entity" is tax speak meaning the annuity owner is not a human being, but is an entity (e.g., trust...Click here for full article
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