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

Apr 30, 2018, 16:39 PM by David S. Markle, CPA
Answer from the free Ask a CPA service on whether one has to pay Pennsylvania taxes on a beneficiary annuity left by his or her mother if cashed out.

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.