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The IRS defines strict requirements a plan must meet in order to receive favorable tax treatment, including: A plan must offer life annuities in the form of a Single Life Annuity (SLA) and a Qualified Joint & Survivor Annuity (QJSA). A plan must maintain sufficient funding levels. A plan must be administered according to the plan document.
Without the tax exclusion, the cost of assignment would be higher, because the assignment company would need to recognize the premium as income. The resulting net after tax amount would be insufficient to fund the assumed obligation. To qualify for special tax treatment, a structured settlement must meet the following requirements:
A financial advisor can help you decide if an annuity is a good … Continue reading → The post How Are Annuities Given Favorable Tax Treatment? appeared first on SmartAsset Blog.
The investment of the pre-tax proceeds potentially gives private annuity trusts the ability to generate substantially more money over the long run than a direct and taxed sale. Partially offsetting this advantage are the compressed income tax brackets for trusts that cause the investment earnings to reach the maximum income tax bracket when ...
Many annuity issuers were concerned that factoring transactions, which were not contemplated when Congress enacted section 130, might upset the tax treatment of qualified assignments. House of Representatives Bill 2884 (discussed below) resolved this question for annuity issuers.
Because of cross-subsidy and the guarantees an annuity can give against running out of income and becoming dependent on state welfare in old age, annuities often have a favourable tax treatment, which may affect how attractive they are relative to other investments.
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