Direct answer
Withdrawals from qualified annuities are taxed as ordinary income because the contributions were made with pre-tax dollars. It depends on whether you have reached age 59½, as early withdrawals may also trigger an additional 10% federal penalty.
IRS Publication 575: Pension and Annuity Income guidelines. For comprehensive details regarding the taxation of distributions, see the Internal Revenue Service’s Publication 575.
What this means for you
Withdrawals from qualified annuities are taxed as ordinary income because the contributions were made with pre-tax dollars. It depends on whether you have reached age 59½, as early withdrawals may also trigger an additional 10% federal penalty.
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