Phil hears a version of this question most weeks, usually from someone about to move: "If I buy the annuity in Ohio and retire to Florida, who taxes the checks?" The short answer is the state you live in when the payments arrive, not the state where you signed. The longer answer is that state tax on an annuity comes in two separate pieces, and most people have only heard about one of them.
The first piece is income tax on the payments. Nine states have none. The other 41 mostly start from your federal return, so whatever the IRS counts as taxable is what the state sees, and then each state layers on its own exclusions and age tests. The second piece is a premium tax charged when the contract is bought. Six states levy it on individually bought annuities today, and where it applies it reduces your monthly income.
Every rule below links to the statute or revenue-department page it came from. Income figures are from our rate tables as of for a single premium immediate annuity (SPIA): $100,000, single life, 5-year period certain, best of the 8 A-rated carriers we publish. None of this is tax advice.
Source: LifeAnnuities.us quote surveys run for real clients. 54 base survey runs received and 52 used for pricing (July 14 to September 14, 2026), checked against 7 new survey runs (September 18 to 29, 2026): 1 of 8 published carriers repriced, 7 held. Joint figures at ages 65 and 70 are calibrated to a direct same-age joint quote. Single life or joint (100% to survivor), 5-year period certain, per $100,000. How we build these figures.
The 9 States With No Income Tax on Annuity Payments
If you live in one of these states, your only income-tax question is federal:
New Hampshire taxed interest and dividends until it repealed that tax for periods beginning January 1, 2025. Washington has a 7% capital gains tax, but RCW 82.87.050 exempts assets held in retirement accounts. Before you pack, note that Nevada, South Dakota and Wyoming have no income tax but do tax the purchase of a non-qualified annuity (see the premium tax section below).
States That Exempt Some Annuity Income, but Not All of It
This is where "does my state tax annuities" gets a two-part answer. Several states exempt retirement income, and their definition of retirement income turns on where the money came from: an employer plan or IRA (qualified money) versus savings you already paid tax on (non-qualified money). Five states come up more than the rest combined.
Illinois
Illinois lets you subtract retirement income from its 4.95% flat tax, and Publication 120 spells out what qualifies: qualified employee benefit plans including 401(k)s, IRAs and SEP plans, Social Security, railroad retirement, government plans and Section 457 plans. A SPIA bought with IRA money is an IRA distribution and comes off. An annuity bought with money from a savings account is not on the list, so the taxable part of each payment is taxed like any other Illinois income.
Pennsylvania
Pennsylvania does not tax distributions from eligible retirement plans once you have reached retirement age. For an IRA, the Department of Revenue's Gross Compensation guide defines that age as the point where a withdrawal would no longer carry a federal early-withdrawal penalty, which in practice means 59½. A SPIA funded from an IRA or 401(k) after 59½ pays nothing to Harrisburg. Take the money out earlier and Pennsylvania taxes the part that exceeds your own previously taxed contributions.
A non-qualified annuity is treated differently. Since Act 40 of 2005, income from an annuity you bought yourself, outside an employer program, is taxable as interest to the extent it is taxable on your federal return (PA PIT Guide: Interest), at the flat 3.07% rate. Only the earnings portion is taxed; the return of your own premium is not.
Mississippi
The Department of Revenue's FAQ says retirement income, pensions and annuities are not subject to Mississippi income tax if the recipient has met the retirement plan requirements, and that early distributions are not retirement income. The statute behind it, Miss. Code §27-7-15(4), is written around government retirement systems and any private plan "of which the recipient was a member at any time during the period of his employment". Qualified money fits. An annuity bought with ordinary savings is not clearly covered, so ask a Mississippi preparer before you count on the exemption.
New York
New York allows a $20,000 pension and annuity income exclusion once you are 59½ (reach that age mid-year and only the payments after your birthday count), and each spouse gets their own $20,000. The IT-201 instructions (line 29) count periodic payments from IRAs, employer pensions, 403(b) contracts and 457 plans. They also name what does not count: "distributions you received as a result of an annuity contract purchased with your own funds from an insurance company or other financial institution." An IRA-funded SPIA gets the first $20,000 a year excluded. A non-qualified SPIA gets nothing from this exclusion.
Michigan
Under the Lowering MI Costs Plan (Public Act 4 of 2023), the retirement and pension subtraction was phased back in over four years: 25% for 2023, 50% for 2024, 75% for 2025, and 100% for 2026 and beyond (Michigan Treasury). From 2026, everyone born after 1945 can subtract qualifying retirement benefits up to the private-pension cap. The cap is indexed each year; for tax year 2025 it is $65,897 single and $131,794 joint (Form 4884 instructions), and the 2026 figure will be a little higher once Treasury publishes it.
Treasury's list of qualifying private benefits (RAB 2026-1) includes IRA distributions after age 59½ and, unusually for a state, "retirement annuity policies paid to a senior citizen (age 65 or older) for life (as opposed to a specified number of years)". How that line applies to a contract bought with after-tax savings is a question for a Michigan preparer, and worth asking before you choose between a life and a period-certain payout.
Other states cap the break in dollars rather than by source. Georgia excludes up to $35,000 per person at 62 to 64 and $65,000 at 65 and older, and lists annuity income first among what counts. Kentucky excludes $31,110 of pension income per taxpayer. New Jersey allows up to $100,000 on a joint return ($75,000 single) at 62 and older, but only while total income is $100,000 or less, with the exclusion shrinking above that and disappearing past $150,000. Missouri caps its private pension exemption at $6,000, and only for Missouri adjusted gross income under $25,000 single or $32,000 married filing combined. Each state's page in the table below has the detail.
Qualified vs. Non-Qualified Money: Why the Same Check Gets Taxed Differently
Start with the federal rules. A SPIA bought with IRA or 401(k) money is 100% taxable (assuming no after-tax contributions), because none of it was taxed going in. A SPIA bought with after-tax savings is taxed under the IRS General Rule: divide what you paid by the expected return, and that share of every payment is excluded until you have recovered your cost (IRS Publication 939; Publication 575 adds that the total excluded over the years cannot exceed your cost).
Most states start from that federal taxable figure, then apply their own exclusions, and here the source of the money matters again, in the opposite direction. Illinois, Pennsylvania, Mississippi and New York give their break to qualified money, which is exactly the money that is fully taxable federally. Non-qualified money gets the federal exclusion ratio but, in those states, no state exclusion on top.
Here is a worked example. In our October 2026 rate tables, $100,000 buys a 65-year-old man up to $693 a month from the carriers we publish, or $8,316 a year. Suppose half of that is taxable after the exclusion ratio (your actual split depends on your age and the IRS tables), about $4,158. In Florida the state tax is $0. In Pennsylvania at 3.07% it is roughly $128 a year; in Illinois at 4.95%, roughly $206. Fund the same $100,000 from an IRA and all $8,316 is taxable federally, but Pennsylvania and Illinois charge nothing. Tell whoever quotes you where the money is coming from, and ask to see the after-tax monthly figure.
All 50 States Compared
This table is generated from the same data that runs our state pages, so the two never disagree. Click a state for its full guide, guaranty-fund limits and current rates.
| State | State income tax on annuity payments | Premium tax at purchase |
|---|---|---|
| Alabama | Alabama exempts defined-benefit pension income but taxes annuity and IRA/401(k) income as ordinary income, with a limited exclusion (up to $6,000) for those 65 and older. | None |
| AlaskaNo income tax | Alaska has no state income tax, so annuity income is not taxed at the state level. | None |
| Arizona | Arizona taxes annuity income as ordinary income at its flat 2.5% rate; Social Security is exempt. | None |
| Arkansas | Arkansas taxes annuity income as ordinary income but allows a $6,000 exemption for qualified pension and IRA income; Social Security is exempt. | None |
| California | California taxes annuity income as ordinary income with no retirement income exclusion; Social Security is exempt. | 2.35% on non-qualified annuity premiums; 0.5% on qualified annuity premiums |
| Colorado | Colorado taxes annuity income at its flat rate but offers a retirement income deduction of up to $24,000 for those 65 and older, which includes annuity income. | 2% on non-qualified annuity premiums; qualified annuities generally exempt |
| Connecticut | Connecticut fully exempts pension and annuity income for filers with AGI below $75,000 (single) / $100,000 (joint); above those thresholds it is taxed as ordinary income. | None |
| Delaware | Delaware taxes annuity income as ordinary income but allows those 60 and older to exclude up to $12,500 of pension and retirement income. | None |
| FloridaNo income tax | Florida has no state income tax, so annuity income is not taxed at the state level. | None |
| Georgia | Georgia offers a generous retirement income exclusion covering annuity income, up to $35,000 at ages 62-64 and $65,000 per person at 65 and older. | None |
| Hawaii | Hawaii exempts employer-funded pension income but taxes annuity and IRA/401(k) income as ordinary income. | None |
| Idaho | Idaho taxes annuity income as ordinary income at its flat rate; Social Security is exempt. | None |
| Illinois | Illinois exempts most retirement income, including distributions from qualified plans, IRAs, and pensions; non-qualified annuity income is generally still taxed at the flat rate. | None |
| Indiana | Indiana taxes annuity income as ordinary income at its low flat rate; Social Security is exempt. | None |
| Iowa | Iowa exempts retirement income, including annuity income from qualified retirement plans, for residents 55 and older. | None |
| Kansas | Kansas taxes annuity income as ordinary income; Social Security is fully exempt. | None |
| Kentucky | Kentucky excludes up to $31,110 per person of retirement income (including annuity and pension income) from its flat income tax. | None |
| Louisiana | Louisiana taxes annuity income at its flat 3% rate but exempts public pensions and allows those 65 and older to exclude up to $6,000 of annual retirement income. | None |
| Maine | Maine taxes annuity income as ordinary income but offers a substantial pension/retirement income deduction (indexed annually and reduced by Social Security benefits received); Social Security is exempt. | 2% on non-qualified annuity premiums; qualified retirement annuities generally exempt |
| Maryland | Maryland offers a pension exclusion (roughly $39,500-$40,600 for those 65+) that covers employer pension and annuity income, though IRA distributions are generally taxed. | None |
| Massachusetts | Massachusetts taxes annuity income at its 5% flat rate; government pensions are exempt but private retirement income is generally taxed. | None |
| Michigan | Michigan's retirement income deduction is fully phased in for 2026, allowing most retirees to deduct pension, 401(k), IRA, and annuity income up to generous limits. | None |
| Minnesota | Minnesota taxes annuity income as ordinary income, with only a partial Social Security subtraction for lower incomes. | None |
| Mississippi | Mississippi exempts qualified retirement income, including pensions, IRAs, 401(k)s, and annuities from retirement plans, from state income tax (early withdrawals are taxed). | None |
| Missouri | Missouri exempts Social Security and offers a public pension exemption, but private pension and annuity income is largely taxed as ordinary income (a limited income-tested private pension exemption applies). | None |
| Montana | Montana taxes annuity income as ordinary income; as of 2025 it repealed its partial pension/annuity deduction, leaving only a limited retirement income deduction for lower incomes. | None |
| Nebraska | Nebraska taxes annuity income as ordinary income; Social Security is now fully exempt. | None |
| NevadaNo income tax | Nevada has no state income tax, so annuity income is not taxed at the state level. | 3.5% on non-qualified annuity premiums; qualified annuities exempt |
| New HampshireNo income tax | New Hampshire has no tax on annuity or retirement income, its interest and dividends tax was fully repealed as of 2025. | None |
| New Jersey | New Jersey offers a retirement income exclusion of up to $100,000 (joint) for those 62 and older with income under $150,000; annuity income above that is taxed as ordinary income. | None |
| New Mexico | New Mexico taxes annuity income as ordinary income, with an $8,000 exemption for those 65 and older; Social Security is exempt for most income levels. | None |
| New York | New York exempts government pensions and allows those 59 1/2 and older to exclude up to $20,000 of private pension and annuity income; the rest is taxed as ordinary income. | None |
| North Carolina | North Carolina taxes annuity income as ordinary income at its low flat rate; Social Security is exempt. | None |
| North Dakota | North Dakota taxes annuity income as ordinary income at very low rates (top rate 2.5%); Social Security is exempt. | None |
| Ohio | Ohio taxes annuity income as ordinary income at its low flat rate, with a small retirement income credit; Social Security is exempt. | None |
| Oklahoma | Oklahoma allows a retirement income exclusion of up to $10,000 per person (covering qualified annuity and pension income); Social Security is exempt. | None |
| Oregon | Oregon taxes annuity income as ordinary income (top rate 9.9%); Social Security is exempt. | None |
| Pennsylvania | Pennsylvania exempts retirement plan distributions (pensions, 401(k)s, IRAs, qualified annuities) taken after retirement age, though non-qualified annuity earnings are taxed at its 3.07% flat rate. | None |
| Rhode Island | Rhode Island taxes annuity income as ordinary income but allows a pension/annuity income exclusion of up to $20,000 for those at full retirement age within income limits. | None |
| South Carolina | South Carolina offers a retirement income deduction (up to $10,000 at 65 and older) plus an age-65 deduction of up to $15,000; Social Security is exempt. | None |
| South DakotaNo income tax | South Dakota has no state income tax, so annuity income is not taxed at the state level. | 1.25% on the first $500,000 of non-qualified annuity premiums (0.08% above that); qualified annuities exempt |
| TennesseeNo income tax | Tennessee has no state income tax, so annuity income is not taxed at the state level. | None |
| TexasNo income tax | Texas has no state income tax, so annuity income is not taxed at the state level. | None |
| Utah | Utah taxes annuity income at its flat 4.55% rate, offering a modest retirement tax credit (up to about $450) for eligible retirees. | None |
| Vermont | Vermont taxes annuity income as ordinary income; Social Security is exempt only for lower-income filers. | None |
| Virginia | Virginia taxes annuity income as ordinary income but offers an age deduction of up to $12,000 for those 65 and older (income-limited); Social Security is exempt. | None |
| WashingtonNo income tax | Washington has no state income tax, so annuity income is not taxed at the state level (its capital gains tax does not apply to annuity or retirement distributions). | None |
| West Virginia | West Virginia taxes annuity income as ordinary income; Social Security is fully exempt as of the completed 2026 phase-out. | None |
| Wisconsin | Wisconsin taxes annuity income as ordinary income, with only a small retirement income exclusion for lower-income residents 65 and older; Social Security is exempt. | None |
| WyomingNo income tax | Wyoming has no state income tax, so annuity income is not taxed at the state level. | 1% on non-qualified annuity premiums; qualified annuities exempt |
State Premium Tax on Annuity Purchases
A premium tax is a tax on the insurer, measured by the premiums it collects in a state. Most states do not apply it to annuities. West Virginia is the most recent to drop it: its 1% tax on annuity considerations was discontinued for tax years beginning on or after January 1, 2021. Florida still has a 1% annuity tax on the books, but Fla. Stat. 624.509 waives it for insurers that credit the savings to their annuity holders, so if a Florida quote shows a premium tax line, ask why. Six states still charge it on individually bought annuities, generally based on the state you live in when the contract is issued:
| State | Premium tax on annuity purchases | Source |
|---|---|---|
| California | 2.35% on non-qualified annuity premiums; 0.5% on qualified annuity premiums | Rev. & Tax. Code §12202 |
| Colorado | 2% on non-qualified annuity premiums; qualified annuities generally exempt | C.R.S. §10-3-209 |
| Maine | 2% on non-qualified annuity premiums; qualified retirement annuities generally exempt | 36 M.R.S. §2513 |
| Nevada | 3.5% on non-qualified annuity premiums; qualified annuities exempt | NRS 680B.025 and 680B.027 |
| South Dakota | 1.25% on the first $500,000 of non-qualified annuity premiums (0.08% above that); qualified annuities exempt | SDCL 10-44-2 |
| Wyoming | 1% on non-qualified annuity premiums; qualified annuities exempt | W.S. 26-4-103(b)(iii), (j) |
Qualified money is the escape hatch in most of these states. Colorado, Nevada, South Dakota (SDCL 58-6-68) and Wyoming exempt annuities issued in connection with qualified retirement plans. California charges 0.50% instead of 2.35% on contracts issued to qualified pension and profit-sharing plans, including individual retirement annuities under Section 408(b). Maine's statute taxes all annuity considerations at 2%, while its premium tax return (Form INS-4) carries a line for premiums exempt under qualified pension plans, so ask for a Maine quote both ways.
What it costs you: for an immediate annuity the carrier either deducts the tax from your premium before calculating income or trims the payout to cover it, and the effect on your check is about the same. On $100,000 of non-qualified money that is $3,500 in Nevada, about $24 a month less for a 65-year-old man at the top figure in our October 2026 rate tables, and $2,350 in California, about $16 a month. Over 20 years that adds up, which is one reason a quote should show the net premium the income is based on. Our guide to comparing SPIA quotes covers what else to look for.
Federal Tax Still Applies Everywhere
Nothing above changes the federal picture. Qualified money is fully taxable as ordinary income when it comes out; non-qualified money is taxed on the earnings under the exclusion ratio. The full walk-through, with the exclusion ratio worked in dollars, is in How Are Annuities Taxed? If your lump sum is in an IRA or 401(k), read Buying an Annuity With IRA Money first; the rollover mechanics matter more than the state rate does.
What to Do Next
- Write down where the money is coming from. IRA or 401(k) versus savings decides more of your state tax bill than the state does. If it is some of each, a split purchase is common.
- Find your state in the table and read its page. If you plan to move within a few years, read both states: the income tax follows you, the premium tax does not.
- See the income before tax. The payout calculator shows the current table figures for your age, or go straight to the pages for $100,000, $250,000 or $500,000.
- Get quotes that show the net premium. Phil runs the same request past multiple A-rated carriers, states the money source, and shows the premium tax line where it applies. Request a SPIA quote here; if the honest answer is "talk to your CPA first", that is what you will hear.
