Ask the Experts!
The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers. Here’s the question of the day.
Question: My client is paying a fee for a financial planner to manage his investments, including a deferred annuity. The fee for management is being deducted from the annuity account. Is that fee considered to be a taxable distribution from the annuity?
Answer: Yes. Fees deducted from a nonqualified annuity to pay for managing the account are taxable distributions subject to the 10% penalty tax, if applicable.
A fee for managing a taxable account is a potentially tax-deductible expense if
- The taxpayer itemizes and
- All miscellaneous expenses (including the fee) exceed 2% of AGI.
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