Annuities grow tax-deferred—but how much you’ll owe depends on whether they’re qualified or non-qualified, and who inherits them.
Annuities offer tax-deferred growth, but taxes are eventually owed on withdrawals. Taxes on annuities are based on whether they are qualified or non-qualified funds.
But what is the difference between a qualified and a non-qualified annuity? And if you aren’t a spouse and inherit an annuity, what are the tax ramifications?
Qualified vs. Non-Qualified Annuities
A qualified annuity is a retirement savings account that is funded with pretax dollars. For example, the funds you contribute to a 401(k) plan or individual retirement account (IRA) are considered qualified annuities.
