Death benefit

An individual taxpayer who is under age 55 and who receives pension and annuity benefits due to the death of the person originally entitled to receive such benefits may subtract such pension and annuity income. In this case, the amount the individual may subtract is limited to $20,000. A taxpayer who receives a death benefit should see distribution code 4 in box 7 of IRS Form 1099-R.

Individual taxpayers who are age 55 or older may claim the subtraction for pensions and annuities regardless of whether any benefit received was a death benefit.

Death benefit income only qualifies if the income is paid directly to the individual taxpayer. If death benefit income is paid to a non-individual, such as a trust, estate, partnership, or other legal entity, and then redistributed to an individual taxpayer, that income does not qualify for the subtraction.