How Are Distributions From Nonqualified Annuities Taxed?
61667 POINTSview profileSteve SavantSyndicated Financial Columnist, Host of the weekly talk show Steve Savant's Money, the Name of the Game, Scottsdale ArizonaNon-qualified tax deferred annuities accumulate tax deferred. The distribution of gain in an annuity is taxable as ordinary income at the effective tax bracket rate of the annuity owner. The basis, or original contributions, are distributed tax free. The long term tax deferral for on-qualified tax deferred annuities can have a significant financial impact.Answered on July 31, 2013flag this answer
37376 POINTSview profileDavid G. Pipes, CLU®, RICP®Business Development Officer, T.D. McNeil Insurance Services, Fresno, CaliforniaThe premiums paid constitute the “basis” for the annuity. Income tax has been deferred on the earnings of the annuity. The first withdrawals from an annuity are considered earnings and are taxed as ordinary income. If this withdrawal is prior to age 59 ½ the earnings are subject to a 10% penalty. Once the earnings are exhausted the basis is returned tax free. If the withdrawals are in an annuity only a portion of the withdrawal is taxed as earnings.Answered on August 28, 2014flag this answer
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