How do I know which method I used to figure out how much of my annuity is taxable? Simplified method? Or general rule?

aherring690 · ‎March 7, 2025

DaveF1006 · ‎March 7, 2025

The method you use to determine the taxable portion of your annuity depends on the type of retirement plan it comes from:

Simplified Method: This is typically used for annuities from qualified retirement plans, such as a 401(k) or a tax-sheltered annuity. You calculate the tax-free portion of each payment using a worksheet provided in the IRS instructions for Form 1040 or Publication 575.
General Rule: This applies to annuities from non-qualified retirement plans. It involves using IRS life expectancy tables to determine the taxable and tax-free portions of your payments.

TurboTax treats both annuities the same way, so it'd be safe to use the simplified method.

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