What Is The Difference Between Qualified And Nonqualified Annuities? 
An annuity is an insurance product with features differing crediting methods using interest rates , index returns or separate sub account performance . Annuities are non-qualified by design and are highlighted as a product because the earrings accumulate tax deferred and the gains are taxed as ordinary income , but your basis is returned to you tax free . If you purchase an annuity for a qualified plan like an IRA , you can deduct the contribution to the plan , it accumulates tax deferred and is distributed as ordinary income , including basis . So your effective tax bracket is one of the determining factors in whether you qualify or non-qualify your annuity . 