A premium tax is a tax some states charge on annuities. The insurance company pays this tax to the state, and the company may subtract the amount of the tax at certain points under the contract.
According to the NAIC Buyer’s Guide, premium tax is one of the possible charges or taxes connected to a fixed deferred annuity. It is not described as applying in every state, but in some states it does apply.
The guide explains that the insurance company may subtract the premium tax when you pay your premium, when you withdraw your contract value, when you start to receive income payments, or when it pays a death benefit to your beneficiary. That means the timing of the deduction can vary by contract and by state.
Because charges and taxes can affect the value of your annuity, the NAIC advises you to read the contract carefully and ask the agent or company to describe the charges that apply to your annuity. Reviewing the contract and disclosure materials can help you understand whether a premium tax applies and when it may be deducted.
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Educational content provided by Jeffrey Scott McLeod, LUTC, National Insurance Producer License #558629. This is for informational purposes only and is not a recommendation to buy or sell any annuity. Guarantees are subject to the claims-paying ability of the issuing insurance company. Always consult your own advisor and read the full NAIC Buyer’s Guide. For residents of your state.
Source: © 2025 National Association of Insurance Commissioners (NAIC). Reprinted with permission. Further reprint or distribution strictly prohibited without written permission of NAIC.
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