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Question: How will the earnings on a 10-year index annuity be taxed upon maturity? Can this be considered as a long-term capital gain?

Any amount that is distributed from an annuity above cost basis - regardless of what subaccount or interest is paid or for how long, is taxed as ordinary income under the internal revenue code, says Kelly LaVigne, vice president of advanced markets at Allianz Life. Read more about that here from the Legal Information Institute.

If, however, the index annuity is in a retirement account, then 100% of income is taxed as ordinary income, says John Ryan, a certified financial planner and principal with Ryan Insurance Strategy Consultants.

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Question: How will the earnings on a 10-year index annuity be taxed upon maturity? Can this be considered as a long-term capital gain?

Any amount that is distributed from an annuity above cost basis - regardless of what subaccount or interest is paid or for how long, is taxed as ordinary income under the internal revenue code, says Kelly LaVigne, vice president of advanced markets at Allianz Life. Read more about that here from the Legal Information Institute.

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