How are annuities given favorable tax treatment
A) Gains are tax deductible
B) Gains are tax exempt at distribution
C) Gains are taxed at distribution
D) Gains are converted to tax credits
The Correct Answer Is:
- C) Gains are taxed at distribution
Annuities are given favorable tax treatment because gains are taxed at distribution. This means that the income generated from annuities is taxed less than other forms of income. Annuity providers may also be able to take advantage of tax breaks, such as the retirement savings contributions credit, which can reduce your tax liability even further.