Annuity payments are taxable as Capitol Gains the year they are received.
If the Annuity is used to fund an IRA/401k/SEP, then the annuity payments will be taxable as Income the year they are received.
The only exception would be if the Annuity is in a ROTH IRA or 401K. Then the Annuity payments would be Income Tax free assuming all IRS requirements are met.
Syndicated Financial Columnist, Host of the weekly talk show Steve Savant's Money, the Name of the Game, Scottsdale Arizona
Non-qualified tax deferred annuities accumulate tax deferred and upon distributions are taxed as ordinary income at the effective tax bracket rate of the annuity policy owner. Basis is distributed tax free. Qualified annuity distributions are taxed as ordinary income at the effective tax bracket rate of the annuity policy owner. There is no basis.
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If the Annuity is used to fund an IRA/401k/SEP, then the annuity payments will be taxable as Income the year they are received.
The only exception would be if the Annuity is in a ROTH IRA or 401K. Then the Annuity payments would be Income Tax free assuming all IRS requirements are met.