Tax Treatment of Variable Annuity Contracts
Chapters in this video
What this video covers
- Why variable annuity gains are always taxed as ordinary income, never capital gains, regardless of holding period or subaccount type
- How partial withdrawals from non-qualified annuities use last in, first out (LIFO) to force earnings out before cost basis
- The 10% early withdrawal penalty before age 59 and a half, and why it only hits the taxable portion of a withdrawal
- How the exclusion ratio splits annuitized payments into non-taxable basis recovery and taxable ordinary income
- Why surrender charges reduce proceeds but do NOT reduce taxable gain on full surrender
- The complete tax treatment difference between qualified and non-qualified annuities, including why LIFO does not apply to qualified contracts
- The exam traps test writers set around FIFO versus LIFO, capital gains assumptions, and surrender charge deductions
Read the full lesson, free
This video's complete written lesson is free to read in the CertFuel app, no signup wall. When you're ready to drill the topic, the full Series 7 course adds adaptive practice questions and spaced-repetition flashcards.
Start on this site: free Series 7 practice questions · Series 7 pass rate