It depends. If you can track your cost in the annuity, meaning the cost you paid for it that was with after tax dollars, you will pay tax on only the earnings. The 1099-R should be completed correctly to reflect this.
- A retiree who contributed to the cost of an annuity can exclude from income a part of each payment received as a tax-free return of the retiree's investment.
- IRS Publication529
Generally, there is no deduction on Schedule A for a loss in an annuity for tax years 2018 through 2025 due to the suspension of miscellaneous itemized deductions by the Tax Cuts and Jobs Act.
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