When Do You Pay Taxes On Annuities? 
It depends what type of Annuity it is and if the Annuity is in a Qualified Retirement Account or not . If it is in a Qualified account , like an IRA/401k/SEP , then any distribution is 100 % taxable . If it is a non-qualified account , then only withdrawals of the gain are taxed -LRB- as income -RRB- . But since Annuities use LIFO , the gain will be the first part of the Annuity that is distributed . The growth of a non-qualified Fixed Annuity is tax deferred . If it is an Immediate Annuity/Lifetime Annuity , then again it depends on the tax status . For a Qualified account 100 % of the distributions/income will be taxable . For non-qualified , a portion of the payments will be tax-free and considered a `` return of basis/premium '' . 