Can I put the earnings of a non-qualified annuity into an IRA?

[A276845X]

I know that you are only taxed on the earnings of a non-qualified annuity, can those earnings be placed in an IRA to defer the taxes until the funds are truly needed?

[JulieS]

No, you can't defer all the taxes on non-qualified annuity earnings by putting them in an IRA. If you are asking if you can rollover the earnings, you can't do that.

You can put the earnings into an IRA, subject to all the usual limitations that are in place for IRA contributions of after tax funds.

For 2021 and 2022 you can contribute the lesser of $6000 ($7,000 if you're age 50 or older), or your taxable compensation for the year. Compensation is earned income only.

Depending on your income and whether you participate in another retirement plan, the contribution may be deductible. 

Click here for more information.

[A276845X]

Thank you for your quick response. Yes, you are correct, by putting the earnings in an IRA I meant to rollover the earning funds into an IRA given that I qualify based on all the IRS requirements to do so. Here is a little more detail on what I want to do: I got a check for $12,000 which are all earnings this January. I qualify for $7K per year IRA. So I want to put $6K on my 2021 IRA and $6K on my 2022 IRA all within the 60 days required for a rollover. The annuity company could not send the check directly to my IRA financial company. Is this all correct according to IRS rules? Thank you.

[DianeW777 · Accepted solution]

Yes, you can put the money into your IRA for both 2021 and 2022 contributions however this is not considered a 'rollover' that requires a 60 day position.  Your distribution of earnings is taxable so you can make the contributions within the timeframe for contributing to an IRA.

And based on your information that you qualify for making a contribution I want to just add that you must have earned income to make a contribution to your IRA. Keep in mind the following allowed maximum contributions:

For 2022, 2021, 2020 and 2019, the total contributions you make each year to all of your Traditional IRAs and Roth IRAs can't be more than:

• $6,000 ($7,000 if you're age 50 or older), or
• If less, your taxable compensation for the year (earned income)
  • IRS Retirement Topics

[A276845X]

Again, thank you so much! Yes, I have earned income along with the other qualifications for the IRA.

[SweetieJean]

Perhaps I misunderstand you, but the "earnings" (e.g., interest or gains) from a nonqualified annuity are not earned income for IRA purposes. Earned income must come from wages, self-employment profit, etc.

[A276845X]

Thanks, my earned income comes from self-employment so I believe I’m good. Thanks to all for your contribution to answering this question.