|Pub. 939, General Rule for Pensions and Annuities
||2007 Tax Year
Publication 939 - Introductory Material
This publication gives you the information you need to determine the tax treatment of your pension and annuity income under
the General Rule.
Generally, each of your monthly annuity payments is made up of two parts: the tax-free part that is a return of your net cost,
and the taxable
What is the General Rule.
The General Rule is one of the two methods used to figure the tax-free part of each annuity payment based on the ratio
of your investment in the
contract to the total expected return. The other method is the Simplified Method, which is discussed in Publication 575, Pension and Annuity
Who must use the General Rule.
Use this publication if you receive pension or annuity payments from:
A nonqualified plan (for example, a private annuity, a purchased commercial annuity, or a nonqualified employee
A qualified plan if:
Your annuity starting date is before November 19, 1996 (and after July 1, 1986), and you do not qualify to use, or choose not to
use, the Simplified Method, or
You are 75 or over and the annuity payments are guaranteed for at least 5 years (regardless of your annuity starting date).
The following are qualified plans.
A qualified employee plan.
A qualified employee annuity.
A tax-sheltered annuity (TSA) plan or contract.
If you cannot use the General Rule.
If your annuity starting date is after November 18, 1996, you must use the Simplified Method for annuity payments
from a qualified plan. This
method is covered in Publication 575.
If, at the time the annuity payments began, you were at least 75 and were entitled to annuity payments from a qualified
plan with fewer than 5
years of guaranteed payments, you must use the Simplified Method.
Topics not covered in this publication.
Certain topics related to pensions and annuities are not covered in this publication. They include:
Simplified Method. This method is covered in Publication 575. That publication also covers nonperiodic payments (amounts not
received as an annuity) from a qualified pension or annuity plan, rollovers, special averaging and capital gain treatment
of lump-sum distributions,
and special additional taxes on early distributions, excess distributions, and excess accumulations (not making required minimum
Individual retirement arrangements (IRAs). Information on the tax treatment of amounts you receive from an IRA is included in
Publication 590, Individual Retirement Arrangements (IRAs).
Life insurance payments. If you receive life insurance payments because of the death of the insured person, get Publication 525,
Taxable and Nontaxable Income, for information on the tax treatment of the proceeds.
Help from IRS.
If, after reading this publication, you need help to figure the taxable part of your pension or annuity, the IRS can
do it for you for a fee. For
information on this service, see Requesting a Ruling on Taxation of Annuity,
Comments and suggestions.
We welcome your comments about this publication and your suggestions for future editions.
You can e-mail us while visiting our web site at www.irs.gov.
You can write to us at the following address:
Internal Revenue Service
Individual Forms and Publications Branch
1111 Constitution Ave. NW
Washington, DC 20224
We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number,
including the area code, in
Useful Items - You may want to see:
Credit for the Elderly or the Disabled
Taxable and Nontaxable Income
Tax-Sheltered Annuity Plans (403(b) Plans)
Pension and Annuity Income
Individual Retirement Arrangements (IRAs)
Tax Guide to U.S. Civil Service Retirement Benefits
Guide To Free Tax Services
Form (and Instructions)
Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
See How To Get Tax Help, near the end of this publication for information about getting these publications and forms.
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