What Are State Premium Taxes on Annuities?
People often worry about extra costs with annuities. While some annuities, like variable annuities, tend to have high fees and hidden costs, most traditional fixed annuities are actually quite low cost products with modest annuity commissions and no hidden fees. One unexpected cost you might see with an annuity is a state premium tax, though these are only applied in 6 states.
State premium taxes are an excise tax that are typically collected by insurers upfront. The insurers effectively pass this tax on to you, reducing your total premium applied to your annuity, which in turn reduces your earnings.
Who pays the state premium tax?
While the insurer is the one who actually remits the tax payment to the state, they pass this cost onto you, the annuity owner. As a result, your earnings are reduced by whatever taxes the insurer has to pay to your state.
The upside to this method is that you aren’t hit with any unexpected tax bills. Instead, the state premium taxes on your annuity are included in your quote. So when you shop for an immediate annuity, your quote is still what you will receive (prior to income taxes). And with a multi-year guarantee annuity, your rate of return is not impacted by state premium taxes.
Which states have premium taxes on annuities?
There are currently 6 states that tax annuity premiums in practice: California, Colorado, Maine, Nevada, South Dakota, and Wyoming.
While Florida technically has a tax on annuity premiums, it is rarely if ever effectively levied. Premium taxes in Florida are exempted if insurers don't pass the tax burden onto you, the annuity holder. Most insurers don't pass this tax on, meaning there is rarely (if ever) a premium tax in Florida.
In addition to this, Texas has a maintenance tax for insurance products, which is not actually a premium tax for annuities. This maintenance tax is reassessed each year and quite low, not to exceed 0.04% by law.
How much are the premium taxes per state?
For the states that do have premium taxes, the rates are based on the tax qualification of your annuity, with qualified annuities often not being taxed at all. That means buying an annuity with your 401k or IRA avoids state premium taxes in totality, or at least to some degree.
Premium Taxes By State
| State | Qualified Tax | Non-Qualified Tax | |
|---|---|---|---|
| California | California | 0.50% | 2.35% |
| Colorado | Colorado | 0.00% | 2.00% |
| Maine | Maine | 0.00% | 2.00% |
| Nevada | Nevada | 0.00% | 3.50% |
| South Dakota | South Dakota | 0.00% | 1.25% on first $500k, then 0.08% |
| Wyoming | Wyoming | 0.00% | 1.00% |
This information is current as of August 17, 2026. Please contact our annuity experts at (866) 866-1999 with any questions.
Are all types of annuities subject to premium taxes?
Not always. In some states, only annuities that are “annuitized” or turned into guaranteed income streams, like an immediate annuity or deferred income annuity, are taxed, while other growth-based annuities like multi-year guarantee annuities are not. However, in other states, all annuity premiums are subject to taxation.
Are premium taxes applied to withdrawals made from an annuity?
No, premium taxes are only applied to the premium purchase amount of the annuity: the money you pay to purchase the annuity.
Your withdrawals are not subject to state premium taxes. However, annuities that have earned interest or have been annuitized are often subject to income taxes. You can learn more about the taxation of annuities here.
Questions about annuities and taxes?
If you have questions about annuities and taxes, reach out to our U.S.-based annuity experts at (866) 866-1999 or contact us. While we are not tax advisors, we can help you understand how annuities are taxed. We have decades of experience and proven track record of customer satisfaction. We promise to give you honest answers to your annuity questions without any sales pressure.
References:
- 2025 Colorado Revised Statutes Title 10 Justia U.S. Law. CO Rev Stat § 10-3-209 (2025)
- Tax on Insurers Law, California Department of Tax and Fee Administration. Retrieved August 2026.
- Premium Taxation of Annuities, National Association of Insurance Commissioners, December 2025.
- Fla. Admin. Code Ann. R. 12B-8.001 - Premium Tax; Rate and Computation, Cornell Law School. Retrieved August 2026.
- §2513. Tax on premiums and annuity considerations, Maine Legislature, Maine Revised Statutes. Retrieved August 2026.
- §2514. Applicability of provisions, Tax on premiums and annuity considerations, Maine Legislature, Maine Revised Statutes. Retrieved August 2026.
- 58-6-68. Insurers subject to taxation--Filing of returns and reports--Exemption of qualified pension, annuity, or profit-sharing plans.South Dakota Legislature, Codified Laws. Retrieved August 2026.
- INSURANCE CODE CHAPTER 257, Texas Constitution and Statutes. Retrieved August 2026.
- 2025 Wyoming Statutes, Title 26 - Insurance Code, Chapter 4 - Fees and Taxes, Section 26-4-103 - Premium Taxes; Generally; Preemption by State. Justia U.S. Law, WY Stat § 26-4-103 (2025)
