I cashed in one annuity and with additional money bought another immediate annuity - why do I have to pay taxe

Question

annuity. Why do I have to pay taxes on profit made in first annuity?

Answer 1

The IRS allows a 60 day period for money from one qualified (pre-tax) investment to be transferred or rolled over into another one. If you receive a distribution and it is not classified as a roll or a transfer, it will be taxed before you see any of that money. If it is classified as one of those and sent to you before going to your new company, then that money falls under the 60 day rule. If you hold it beyond those 60 days, it will be taxed.

Answer 2

Annuity income is NOT treated as a capital gain, it is treated as ordinary income. Annuities are bad, most people don't understand that it is a bet that you will die sooner than the money. Best to talk to a financial planner before doing anything. Annuities are fraught with fees that will drag down your returns to what Treasury bonds pay.

Answer 3

You have to pay taxes on it because it's a capital gain. When you cash in the annuity you purchased, those gains will be taxable as well. It isn't a rollover, like a Traditional IRA would be, and the taxes aren't deferred as they are in a Traditional IRA.

Answer 4

the only way to avoid paying on the profits is to do a rollover similar to a 401k from one annuity to another. I believe this is called a 1055 exchange, but I am not 100%. I often get that confused with the 1031 exchange for real estate

Answer 5

might be like a IRA? if you took possession of funds and then re did the annuity , they class it as a penalty income? if you roll it over and no money is rec'd by you in and IRA yu pay no tax till yu start disbursal.

Answer 6

Because you "cashed" it in.....