How Is A Fixed Annuity Taxed? 
The gain on an annuity is taxed as ordinary income . If the annuity is held in a qualified retirement plan and premiums were previously deducted from income tax , the entire amount received is taxed as ordinary income . If the annuity is held in a Roth IRA , Roth403 -LRB- b -RRB- or Roth 401 -LRB- k -RRB- none of the distribution is taxed . Taxation varies according to where the annuity is held in the case of death as well . 