Does Your State Tax Annuity Premiums? 2026 Chart

Does your state tax annuity premiums?

For the overwhelming majority of buyers, the answer is no. Just eight jurisdictions tax the money going into an annuity in the first place, and what they charge is all over the map, from a sliver of a percent to well past three. Everywhere else, 42 states plus Washington, D.C., an annuity purchase carries no premium tax at all. If you happen to live in Nevada, California, Colorado, Maine, Florida, Wyoming, South Dakota or Puerto Rico, a small tax can apply, though qualified retirement money is often exempt or taxed at a reduced rate even there.

What is an annuity premium tax, exactly?

Think of it as a one-time sales tax charged on the money you deposit into an annuity, collected by the state the moment the contract is funded. Nearly every state leaves annuities out of this tax entirely, which is exactly why most buyers never encounter it.

Where the tax does exist, it's simply a percentage of what you put in. Fund a contract with $90,000 in a state that charges 1%, and $900 goes to the state. The carrier fronts that payment and then gets it back from you, either shaving it off your premium right away or pulling it from your account value later, once you annuitize or surrender.

This is a different tax entirely from income tax. The premium tax hits money going in; income tax hits money coming back out, whenever you take a withdrawal or start receiving payments. For how the payout side works, see our guides on the exclusion ratio and how annuities are taxed.

The eight jurisdictions that tax annuity premiums

Here is what each of the eight charges, along with its main carve-out.

Three of these eight, Nevada, Wyoming and South Dakota, waive the tax entirely on qualified retirement annuities, and California cuts its own rate by almost 80% for qualified contracts. Once you account for those carve-outs, most retirees rolling over an IRA or 401(k) pay far less than the sticker rate implies.

Full 50-state premium tax chart

Every state appears below, alongside the District of Columbia and Puerto Rico. A listing of "None" tells you that jurisdiction leaves annuity premiums out of its tax base, or its own insurance regulator simply never taxed them to begin with.

Figures reflect the National Association of Insurance Commissioners' state insurance charts on annuity premium taxation, reviewed December 2025. Treat this as a summary rather than tax guidance, and confirm current rates with your carrier before funding a contract, since state statutes do change.

What the premium tax really costs, in dollars

For most people, nothing. Where the tax applies, it tends to be a modest, one-time hit rather than an ongoing drag.

Example one: Carl, age 66, is a Florida resident who takes $180,000 from a maturing CD and funds a five-year MYGA. Florida's 1% tax works out to $1,800 up front, or about $360 a year averaged over the term, roughly 0.2% of the balance annually. That is a real cost, but it is tiny compared with the swing in guaranteed rate you can find just by shopping several carriers.

Example two: Ruth, age 71, funds a California income annuity with a $280,000 IRA rollover. Since the money is qualified, California charges its reduced 0.5% rate rather than the standard 2.35%, so the bill comes to $1,400 instead of $6,580. The source of the funds changes the outcome as much as the state does.

Who actually pays: you or the insurance company?

On paper, the insurer is the one writing the check to the state government. In practice, though, that expense still finds its way back to you, one of two ways.

Front-end: the carrier deducts the tax from your premium before crediting it, so a $120,000 deposit in a state charging 1% starts earning interest on only $118,800.

Back-end: your full premium earns interest from day one, and the tax comes out later, when you surrender the contract or annuitize it.

Most fixed and MYGA carriers simply build the tax into their pricing up front, which is part of why quoted rates can vary slightly from state to state. The number a carrier quotes you already bakes in how it deals with your state's premium tax rule.

Ways to reduce or avoid the premium tax

You can't relocate purely for tax purposes; the tax follows your legal state of residence. A few real levers do exist, though.

Fund the contract with qualified money where an exemption applies. South Dakota, Wyoming and Nevada each let a 401(k) or IRA rollover into an annuity owe absolutely nothing, since the exemption follows the source of the funds rather than the type of contract you buy.

Know where you already stand. Residents of any state outside that short list of eight have nothing here to plan around at all, though it's worth also checking which states don't tax retirement income more broadly, since that is a separate question entirely.

Weigh the tax against the rate, never in isolation. A carrier offering half a point more almost always outweighs a one-time 1% premium tax over any multi-year term. A licensed strategist can help you match a contract to your state and your funding source, and show you what the tax actually costs against several carriers' rates before you commit to one.