Qualified Annuity Distribution Taxable in Illinois

[josh4256]

My husband inherited a qualified annuity from an insurance company in 2023.  We took it out in full and received a 1099R.  I know it is subject to federal taxes, but is it subject to IL income tax?  Turbo tax is putting it as non-taxable (lumping it as a pension or IRA distribution), but we think it is taxable.  We think we should change the amount to $0 in the step by step question where it takes it as a deduction to income.  Any input would be appreciated.  Thank you.  

[DaveF1006 · Accepted solution]

Yes, it is taxable to Illinois residents. it depends how you entered this into the program. Did you enter this as a qualified plan when it asked the question? If you said yes, then the program thinks this is a qualified retirement pension that is not taxable to the state of Illinois. Switch your choice to non-qualified and see if this will make the difference because an amount from a life insurance settlement is non-qualified.

I tested this into my own program and it worked. The amount was reflected correctly in Box 1 of the Illinois 1040. let me know if this works.