Annuity termination

BobWB · ‎March 31, 2023

MY question is why does my annuity investment (cost) returned to me upon annuity termination get treated as income in Turbo Tax? It pushes me into a much higher tax bracket even though its not taxable!

AmyC · ‎March 31, 2023

It should not be taxing a return of money already taxed - from a ROTH. However, if the money was invested into the annuity with pre-tax dollars, then it would be taxable now.

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dmertz · ‎March 31, 2023

Your investment in the contract that was distributed to you is indeed defined as income in the tax code, it's just that it's nontaxable income. This nontaxable income is required to be included on Form 1040 line 5a but is excluded from line 5b and has no effect on the rest of your tax return.