Is Annuity Income Taxed?

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   Peggy Mace

   Most of the U.S.

   Yes, annuity income is taxed. The growth inside the annuity is tax deferred during the accumulation phase, but when you start the annuitization or distribution phase, where you start collecting payments, you will need to start paying income taxes on them. If you receive the payment as a lump sum, you will pay taxes on the difference between what you paid in and what you were paid. Not only can annuities be a good source of retirement income, but most people are in a lower tax bracket when they retire, so that the taxes do not sting as much.

   Answered on July 15, 2014

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