Do I have to pay Pennsylvania taxes on a beneficiary annuity left to me by my mom if I cash it out?

by David S. Markle, CPA | Apr 30, 2018

My mom left me an annuity. If I cash it out, do I pay state taxes on it? I am 62 years old and live on a retirement income. The cash value is around $52,000, and I make about $24,000 a year during my retirement. It’s a beneficiary annuity.

If the annuity is nonqualified (not a retirement annuity), the earnings portion of the distribution is taxable to Pennsylvania. The amount taxable would be the same as the amount taxable for federal tax. This information would be provided on a 1099R from the annuity company. 
If it is a qualified retirement annuity (either stated as retirement annuity or marked as an IRA on the 1099R), then the distribution is not subject to Pennsylvania income tax.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: David S. Markle, CPA, is a CPA financial planner with Markle Wealth Management in Danielsville, Pa.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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