Today TaxMama hears Kathy in Oklahoma who asks .
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“Do I have to pay taxes on money withdrawn from an annuity in order to purchase a home?”
Dear Kathy,
Yup!
Unless that annuity was an IRA, the proceeds are taxable.
The good news?
1) You only pay taxes on the annuity’s earnings. The draw you took will
be composed two things – your contribution and earnings. So depending
on how long you had that annuity, the tax hit may not be much.
2) You won’t have IRS early withdrawal penalties.
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The annuity itself might have
penalties, though.
Incidentally, even if this account were an IRA, your would still have to pay
taxes on the money you draw for a down payment on a home. The special
first-time home-buyer provision simply exempts you from the early withdrawal
penalties – not the taxes.
And remember, you can find answers to all kinds of questions about early withdrawals and other tax issues, free.
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Where? Where else? At TaxMama.com
- Ask TaxMama :: Where taxes are fun and answers are free
- www.TaxQuips.com :: The number ONE free tax podcast online
- IRS Publication 575, Chapter 2 :: Distribution Before Annuity Starting Date From a Qualified Plan
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