Q. Are annuity payments received during retirement taxed? In other words, does the formula provided for calculating annuity computation determine the gross payment?
A. A portion is taxed, and the remainder is tax-free because they represent a return of your retirement contributions, which were taxed when you received your salary. To find out how the proportions are determined, go to www.irs.gov/pub/irs-pdf/p721.pdf.