early withdrawal charges annuities/cd’s
I have a client that told me the surrender charges for early withdrawal on annuities & cd’s is tax deductible. Is this true? JG
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I have a client that told me the surrender charges for early withdrawal on annuities & cd’s is tax deductible. Is this true? JG
[list][/list]
Permalink Submitted by Alan Spross on Thu, 2008-03-13 19:21
An early withdrawal penalty for savings accounts or CDs will show on your 1099 INT form and is an adjustment to income on line 30 of Form 1040.
Annuities are different. There is no deduction until you receive a complete lump sum distribution of the annuity, and the amount received is less than your remaining cost basis. There is no deduction for interim redemptions that carry a surrender charge. The loss deduction would be claimed as a misc itemized deduction on Sch A subject to the 2% of AGI floor.