Do annuity winners have to pay tax on their winnings?
Unlike other Top Prizes, which are awarded with a single payment, the annuity prize does have tax implications as the income element of the annuity is taxable. The annuity provider ensures that the proper amount of tax is withheld for the income portion of the annuity, but does not take any additional income that the annuitant has into account. Any additional tax is the responsibility of the winner. As well, future changes in tax rates will not be accounted for by the annuity provider and will be the responsibility of the winner. Tax increases may result in more tax having to be paid by the annuity recipient while tax decreases may result in a refund or windfall for the recipient at tax time.
