A. It depends on which component of the fix annuity and where it is held.
- The gain on an annuity is taxed as ordinary income.
- If the annuity is held in a qualified retirement plan and premiums were previously deducted from income tax, the entire amount received is taxed as ordinary income.
- If the annuity is held in a Roth IRA, Roth403(b) or Roth 401(k) none of the distribution is taxed.
- Taxation also varies according to where the annuity is held in the case of death.