Annuity Taxation

Annuity Tax Rules and Information

annuity taxation
Figure 1. Annuity Taxation

How Are Annuities Taxed in Canada?

In Canada, both registered and non-registered annuities are subject to taxation, but they are taxed differently.

Income received from a registered annuity is 100% taxable to the policyholder in the year that it is received. On the other hand, only a portion of the income received from a non-registered annuity is taxable to the policyholder. The income received from a non-registered annuity can have prescribed or non-prescribed (accrual) tax treatment.

Portion of Annuity Payment Subject To Tax

  • Registered / Pension Funds
  • For annuities that are purchased with Registered or Pension funds, the income from the annuity is 100% taxable in the year that it is received.

  • Non-Registered Funds
  • For annuities that are purchased with Non-Registered funds, only the interest portion of the payment is taxable. In other words, only a portion of the payment is taxable in the year that it is received. Non-Registered annuities can either have prescribed or non-prescribed (accrual) taxation.

Prescribed & Non-Prescribed Annuities

Phil Barker

About the Author

Phil Barker

Phil Barker is a leading expert on life annuities in Canada. LifeAnnuities.com has different financial products and has been a recognized authority since 1972.

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