Partial Withdrawals/Qualified
Understandably, taxation of qualified annuities should be different than non-qualified annuities since dollars in a qualified annuity are dollars that have never been taxed. In the IRA market, you, for example, made $3,000, then placed it in an IRA, then you deducted the $3,000 on your income tax return. You have never paid taxes on that $3,000. Or, you are a teacher and are participating in a 403(b) annuity program and $250.00 is going directly into a 403(b) annuity. You have never paid income taxes on that $250.00. Therefore, it makes sense that withdrawals of all pre-tax dollars (contributions and earnings) are fully taxable plus a possible 10% tax penalty if dollars are withdrawn prior to age 59.5.