topic Annuity death benefit in Get your taxes done using TurboTax

Annuity death benefit

cj353 — Tue, 31 Dec 2024 16:28:20 GMT

I am trying to optimize our IRA withdrawals for 2024 (eg, not trigger Medicare surcharges).

We know all of our 2024 income, and the implications, except for one 1099R. We received a 1099R for a one-time beneficiary death payment from an aunt who died. It is a non-qualified annuity with my wife as the death beneficiary.

This is the only relevant information on the 1099 (eg, I am excluding tax withheld). I am also rounding the numbers just to make a simpler presentation:

- Box 1 Gross Distr 36,000

- Box 2a Taxable Amount 16,000

- Box 5 Annuitant Contributions 20,000

- Box 7 Distrib Codes 4 D

NO OTHER boxes have any info. It is clear that 16,000 is taxable income. My question is: What amount will contribute to AGI? 36,000 or 16,000? It seems to me it should be 16,000 as the other 20,000 is the aunt's original (or remaining) contribution.

This is ALL we know, as the executor is VERY slow to provide info or answer questions. Turbo Tax has the 1099 form withheld pending updates, so I cannot see how Ttax would handle it.

I am flying blind. Can anyone make a statement, or a highly likely guess?

Thanks for any help you can provide!

Re: Annuity death benefit

SusanY1 — Tue, 31 Dec 2024 20:56:36 GMT

$16,000 is the amount that will factor into your Adjusted Gross Income (AGI). As you have surmised, the other amount is the return of the aunt's original contribution (or basis) which was already taxed in the year or years she earned the income.

Re: Annuity death benefit

cj353 — Tue, 31 Dec 2024 21:15:56 GMT

Thank you very, very much! I thought that would be the correct answer, but I wanted to verify if possible.

For years now, in late Dec, I have made IRA conversions to Roth accounts up to the projected Medicare first surcharge bracket for 2 years out, less a few thousand dollars to prevent accidental creepage "over the line". Crossing that line by just $1 would add more than $2,200 to my tax bill.

You helped me proceed as normal, instead of giving up $16,000 of Roth conversion "window"!

Thanks again!