Life Insurance Endowment Payments from India

[cspfire2024]

Hello Tax Experts,

I would really appreciate your time and help with my tax situation.  

- I have been paying Insurance Premiums (post-tax) for an Insurance Policy in India from 2005 onwards. 

- After 20 years (starting this year), I have been received payments.

- I kind of paid around $20K towards premiums during the last 20 years.

- This year, I received around $1200 as Endowment payment.  I think, I will be receiving such payments yearly for next 10 or 20 years. 

- Just as an FYI - These payments are not taxable in India.

Questions:

- I assume I need to report this in my 2025 Tax return, where would I do that?

- Is the income taxable?  If yes - how can I factor-in the payments I made so far.

Thank you so much.

Regards

CP 

[DMarkM1]

Yes, assuming you are a US Citizen or Resident Alien you would be taxed on your worldwide income regardless of India taxation.  Publication 575 indicates annuity payments received less premiums paid are US taxable income.  Had India taxed the income you could claim a credit for foreign taxes paid.  You will enter the income as if you received a 1099R for the annuity payment in the "Wages and Income" "IRA, 401k, Pension (1099R)" topic (Steps below). 

It appears you would use the "General Rule" to determine the taxable portion of your annuity.  Publication 939 has the steps to make the calculations for your specific situation.  You will need to figure the Expected Return and then the taxable part of your annuity payments.  

1. Select "Wages and Income" from the menu
2. Start "IRA, 401K, pension (1099R)" topic
3. Enter address of payer (use foreign address button if needed) 
4. Enter a generic FED ID such as 22-2222222 (to allow e-filing)
5. Enter the gross distribution amount in box 1
6. Enter the taxable portion of box 1 into box 2 per your calculations from Publication 939
7. Enter the non-taxable contributions (difference between boxes 1 and 2) into box 5 from your Publication 939 calculations
8. Enter Code 7 and Code D into the box 7's
9. Continue 

This will make entries on lines 5a and 5b on form 1040 for pensions and annuities.