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Understanding Annuities and Taxes: Mistakes People Make

August 18, 2021

When it comes to taxes, we all have to pay the piper. In this case, the piper is Uncle Sam. So, even though you’ve seemingly already paid your fair share, your taxes aren’t going to necessarily be any lower in retirement. And, this also applies to annuity owners.

Annuity Taxation 101

Dare taxed by the IRS based. And, the tax is almost entirely calculated on how they were acquired.

For example, if you bought an annuity with money from a Roth IRA or Roth 401(k), you aren’t responsible for federal income taxes. This could apply even to the total annuity balance. This will include your initial payment amount and any dividends and interest paid to you during its life.

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