Rcvd a 1099 R from a life insurance company for an Annuity purchased 4/2008 and cashed in 2017. Cost Basis ~$24000 and received in $32000. For an $8000 profit. Some how it appears that the entire amount of $32000 is being taxed in PA. Is that correct? It appears as if TT is only taxing the profit for federal but ALL of the gross distribution for PA?? Can you help me or am I entering the data incorrectly. This is not an IRA of any type just a annunity purchased. Thank you.
Distributions listed in boxes 8 or 9b are distributions from an insurance policy or annuity purchased for your retirement. Such distributions are not taxable if:
1. Your insurance policy or annuity was from an eligible plan for PA PIT purposes; and
2. You retired after meeting the age or years of service conditions of such eligible plan.
In the PA interview, go to the income and adjustments section and start through the interview. After it asks questions about W2 (if you have any) it will ask about pensions. It will ask “What kind of pension income did you have from PA? Click on the state type code and select the proper type of pension. There is no distinction between pensions, IRA or other 1099-R distributions here. (See the attached screenshot below. Click to enlarge.)
Continue to review them (don't click Done With State until after you reviewed and corrected anything that needed to be changed).
Please see below for more information.
Not all 1099R distributions are exempt from PA income tax. You have the opportunity, in the PA interview, to review each 1099R and designate what kind of retirement distribution it is.
The income reported on a 1099R is considered taxable unless you tell the program otherwise.
Retirement plan distributions need to be reported on a PA income tax return. Normal distributions (Box 7 coded a 4 or 7) are not taxable on a PA income tax return.
Distributions coded with a D (such as 7D) are annuity distributions and are taxable same as federal.
Your basis is the amount you contributed to the retirement plan through the years ($24,000). You don't count earnings or employer contributions, only your own personal contributions.
Your current basis is the amount you contributed to the plan less any previous distributions from the plan taken in earlier years.
In order to get there quickly, simply click on State Taxes across the top and click Continue to review them (don't click Done With State until after you reviewed and corrected anything that needed to be changed).