Annuity withdrawal

Forum|Forum|6 months ago
March 4, 2026
4 replies
63 views

We had around $225000 in an annuity and we are both over 62. We decided to pretty much eliminate our debt an withdrew or closed the account. We only received $180000. Can we deduct the difference and how?

TurboTax Home & Biz Windows

DianeW777

Level 15

It depends. If you can track your cost in the annuity, meaning the cost you paid for it that was with after tax dollars, you will pay tax on only the earnings. The 1099-R should be completed correctly to reflect this.

A retiree who contributed to the cost of an annuity can exclude from income a part of each payment received as a tax-free return of the retiree's investment.
IRS Publication529

Generally, there is no deduction on Schedule A for a loss in an annuity for tax years 2018 through 2025 due to the suspension of miscellaneous itemized deductions by the Tax Cuts and Jobs Act.

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dmertz

Level 15

If some portion of the distribution went to state tax withholding, this portion can be included on line 5a of Schedule A. TurboTax will do this automatically upon entering the Form 1099-R if your itemized deductions exceed the standard deduction. Federal tax withholding is not deductible on your federal tax return, but might be deductible on some state tax returns (Alabama, Missouri and Oregon).

DianeW777

Level 15

It depends. If I assume this account was a 'pre-tax' account then none of the loss is deductible. The reason is that none of the funds, including earnings were ever taxed. For that reason, there is no tax benefit for you on the loss in value / cash you actually received. In other words what you hoped to receive versus what you actually received.

The only available reduction to the taxable amount received could be any funds you actually did contribute with 'after-tax' funds.

Please update with greater detail if this happen to be a Roth TSP.

@pnetrick

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