For income tax purposes, when is interest credited to a nonqualified annuity recognized by the contract owner?

Question

1. Never
2. When credited interest is distributed under the contract
3. When a premium deposit is made
4. When interest is credited to the contract

Answer 1

For income tax purposes, interest credited to a nonqualified annuity is recognized by the contract owner:

4. When interest is credited to the contract.

In a nonqualified annuity, the interest earned is typically tax-deferred until it is withdrawn or distributed. However, the contract owner recognizes the interest for tax purposes when it is credited to the contract, rather than when it is withdrawn or distributed.