 Wysłany: Pon 7:34, 21 Mar 2011 Temat postu: ghd site 1665 |
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| Tax Planning for Annuities
Favorabletax treatment is one of the main reasons for buying an annuity. But whatexactly are the tax benefits? And are there any drawbacks? It's important toknow the answers to these questions before deciding whether to purchase anannuity. Ofcourse, any information pertaining to taxes is complex, full of exceptions, andsubject to change. This discussion deals with the general rules for taxation ofannuities--you should consult a tax advisor for more specific informationbefore you take any action. Taxation of premiumsAnnuitiesare typically funded with after-tax dollars. So, the money you pay into anannuity (in the form of premiums) is nondeductible. By placing funds in anannuity, you will not realize any current income tax savings,spyder nebula hat, unlike puttingmoney into a traditional IRA, 401(k) plan, or other employer-sponsored retirementplan. Tax-deferred growthUnlikemost investments, an increase in the value of an annuity from interest is notcurrently taxable. Generally, annuity funds are allowed to grow tax deferreduntil they're distributed, at which time the owner will pay ordinary income taxon all gains. Taxation of premature withdrawalsWithdrawalstaken before age 59? may be subject to a 10 percent IRS penalty tax unless anexception applies. When you make a withdrawal from an annuity, the IRS assumesthat earnings are withdrawn first. The 10 percent penalty applies to theearnings portion of a withdrawal. So, early withdrawals are costly from a taxstandpoint. Forexample, if your annuity has grown by $1, 000 since you purchased it,ferragamo loafers, a $500withdrawal would be considered 100 percent interest and would be subject to the10 percent penalty--in this case,ghd site, $50. In addition, because the entirewithdrawal represents earnings, it would be subject to ordinary income tax. Ifyou are in the 25 percent tax bracket, your income tax liability on thewithdrawal would be $125. Adding this to the early withdrawal penalty, $175 ofyour $500 withdrawal would end up in the IRS's pocket. Taxation of scheduled distributionsIfyou choose an annuitization option, you will begin receiving regular distributionsfrom your annuity over a predetermined period of time. Each distributionconsists of two components: principal (a return of the money you paid into theannuity) and earnings. The percentages of principal and earnings of eachdistribution will depend on the annuitization option chosen. Again, theearnings portion of each distribution will be treated as ordinary income. Also, depending on the annuitization option chosen, the 10 percent penalty rule maynot apply. Note: Annuity guarantees are subject to the claims-paying ability of the annuityissuer. Taxation of lump-sum distributionsTakinga lump-sum distribution of your annuity funds can have many consequences. Ifyou make this election within the first few years after purchasing yourannuity, you may be subject to surrender charges imposed by the issuer. In anycase, the earnings portion of the distribution will be treated as ordinaryincome in the year you take the distribution. Also, keep in mind that a largelump-sum distribution could actually push you into a higher tax bracket,discount ferragamo shoes online, dramatically increasing your tax liability. Written byLife Insurance Quote | Life Insurance Rates: BeamaLife.Topics related articles： puma mostro trainers 0087 ghd hair straightners 1231 mbt lami black 4061 |
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