How Are Distributions From Nonqualified Annuities Taxed? 
Non-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 . 