What taxes can I expect to pay on an annuity that has been withdrawn?
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I have a variable rate annuity that I would like to cash out in order to take care of some outstanding debt. Because I am over 59 1/2, I know that I am free from the 10% tax penalty for early withdrawal, but I believe that I have to pay income tax on this next year. My question is - what exactly can I expect to pay in income tax next year? I'd like to set aside that amount from the withdrawal to ensure that I don't have to pay a ton next year, but after Googling the heck out of this question, I am no sooner to understanding what to expect. Is it 50%? 30%? More? Less? Any help would be appreciated!
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Answer:
The part that is earnings will be added to your income. Your tax bill is based on your total income for the year. If you have no other income and are not a dependent, the first $9650 won't be taxed. The next $8700 is at 10%, etc.
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Other answers
the only penalty you might incur on an annuity would be that of the company you have the annuity, some do not penalize at all after a specified number of years have elapsed the amount your annuity has earned is taxable, not your original contribution to the annuity
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