Annuity income from an immediate or payout annuity is a blend of interest and return of principal. You can think of it as a mortgage in reverse.
In Canada, if the annuity income is from a registered plan then it is fully taxable. Non registered income from an annuity can be taxed (the interest portion) either as earned or on a prescribed basis. If the annuity can qualify as a prescribed annuity the "interest" or the non return of capital portion is averaged over the expected duration of the contract. This often results in a much higher initial after tax income.
Additional information on annuities and retirement plans can be found at www.protectandgrow.ca.
If you have additional questions or feel that I could be of assistance, please do not hesitate to contact me.
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In Canada, if the annuity income is from a registered plan then it is fully taxable. Non registered income from an annuity can be taxed (the interest portion) either as earned or on a prescribed basis. If the annuity can qualify as a prescribed annuity the "interest" or the non return of capital portion is averaged over the expected duration of the contract. This often results in a much higher initial after tax income.
Additional information on annuities and retirement plans can be found at www.protectandgrow.ca.
If you have additional questions or feel that I could be of assistance, please do not hesitate to contact me.