Asked in Tax Law

Q: Question on annuity payout if moved out of MA where annuity was purchased. Where is the payout reported? MA or new state

My domicile was in MA till mid-May 2023. I had a fixed non-qualified annuity purchased in June 2020 with no surrendering fees as of June 2023. I took the payout at this time. I received a 2023 1099-R at my new address (outside of MA) for the amount of interest accumulated over the three years.

My questions are the following:

Not being a resident of MA (no domicile, no address) when I received the interest payout, do I report this interest in my new residence state or still in MA or both? If it has to be reported in MA, what about if I had kept that annuity for twenty years and never lived in MA for 19 of those 20 years, does one still has to report the interest payout to MA, because the annuity contract was taken there initially?

Any official documentation references would be appreciated.

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1 Lawyer Answer
James L. Arrasmith
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  • Tax Law Lawyer
  • Sacramento, CA

A: When determining where to report the interest payout from your annuity, you should consider both the state where you currently reside and the state where the annuity was initially purchased. Generally, annuity interest is reportable in the state of your domicile at the time of receipt. Since you were no longer domiciled in Massachusetts when you received the interest payout, you would likely report it in your new residence state. However, it's essential to review the tax laws of both states to determine any specific reporting requirements or reciprocal agreements that may apply.

Regarding your scenario where you held the annuity for twenty years with minimal time spent in Massachusetts, the reporting would typically align with your domicile status at the time of receipt. If you were not domiciled in Massachusetts at the time of the interest payout, you would likely report it in your new residence state, regardless of where the annuity contract was initially taken. Again, it's advisable to consult the tax laws of both states and any relevant official documentation or publications to ensure accurate reporting and compliance with state tax regulations.

To obtain official documentation references and specific guidance on your tax reporting obligations, you may consider referring to the tax codes or regulations of Massachusetts and your new residence state. Additionally, you can seek assistance from tax professionals or advisors who are knowledgeable about interstate taxation and annuity income reporting. They can help interpret the relevant laws and provide guidance tailored to your individual circumstances, ensuring that you fulfill your tax obligations accurately and avoid any potential penalties or discrepancies.

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