topic Pennsylvania Distribution Type and Basis for a Life Insurance 1099-R (for dividends) in Get your taxes done using TurboTax

Pennsylvania Distribution Type and Basis for a Life Insurance 1099-R (for dividends)

kevinr12240 — Mon, 22 Mar 2021 21:23:14 GMT

I received a 1099-R for the dividends from my life insurance. Box 7 is 7. It is a non-qualified plan. Would I use: K2 - Non-qualified deferred compensation plan OR...

K3 - Life insurance or endowment OR...

Another distribution type?

If it is PA taxable, Turbotax asks for the (cost) basis of the policy. The background is that my grandparents and then my father paid all of the premiums on the life insurance policy for me. I now receive a 1099-INT and 1099-R each year from this "paid up" policy. I have never withdrawn any of the money, letting the earnings accumulate. I do know the total dollar amount of premiums paid by my family. Is that the cost basis? Or, since I personally did not pay any premiums, is the cost basis zero?

Re: Pennsylvania Distribution Type and Basis for a Life Insurance 1099-R (for dividends)

ErnieS0 — Tue, 23 Mar 2021 00:03:47 GMT

Enter this as life insurance so TurboTax can transfer it to the "interest" section of PA-40.

Pennsylvania says, "Any amounts reported in gross income for Federal Income Tax purposes for a retirement annuity that is not an employer sponsored retirement annuity... are reported as interest income on PA Schedule A regardless of whether the annuity payments began before January 1, 2005, or on or after January 1, 2005."

Your cost basis would be the sum of the premiums paid, even if you did not pay them. The cost basis relates to the cost of the policy.

If you enter it as life insurance, PA should not ask for a cost basis. It sounds like what you are receiving is policy dividends which are taxable earning. The cost basis would come into play if you cancel the policy and receive a cash surrender value,

Related Resource:

How do I know if the amount on my 1099R (1099-R) is taxable on my PA Personal Income Tax Return?

Re: Pennsylvania Distribution Type and Basis for a Life Insurance 1099-R (for dividends)

kevinr12240 — Wed, 24 Mar 2021 19:30:54 GMT

Thank you very much for your prompt and concise answer. There's definitely a learning curve for each state's income tax! I've made the change and the distribution amount was transferred.