I Have a Non-Qualified Variable Annuity with a $100K cost basis. It has grown to $143,000. What is taxable?

Question

I'm thinking the IRS will tax all of the growth ($43,000), as ordinary income. So if I do a 1035 tax-free exchange of $43,000 to another tax sheltered annuity and a withdraw of the remaining $100,000, I should pay no taxes at that immediate time? Sound right? Thanks for any tips.

Answer 1

You don't mention your age, so I'm thinking you're not required to start withdrawing yet. If so, everything is tax-deferred until you actually withdraw. See your tax preparer for details. I see no reason not to stay with this variable annuity... why not leave it alone for another ten years?