The Tax Resources Blog

Posts Tagged ‘income-tax’

Tax Sheltered Annuity Limits

Question: If a person earns $50,000 and withdraws $25,000 from a tax sheltered annuity, what is the tax bill?

Is the tax bill same as if earned income was$ 75,000? Or is there some limit to the tax on the $25,000 TSA withdrawal?

Answer: The “principal” portion of the annuity withdrawal is not taxable, only the earnings are. It’s LIFO (last in, first out). If you contributed $20,000 and it grew to $30,000 and you withdrew $25,000 then you are considered to be withdrawing the $10,000 earnings (taxable) and $15,000 of principal (not taxable).

Stop Paying Taxes – Grantor Retained Annuity Trust – GRAT – Skloff Financial Group