South Carolina’s income tax rate dropped to a flat 3% in 2024, down from 7% just two years prior, making it one of the most annuity-friendly tax environments in the Southeast. Barbara, a 64-year-old retired Columbia school district administrator with $220,000 from a 403(b) rollover, found that a 5-year multi-year guaranteed annuity locked in a competitive rate while keeping her future tax bill at one of the lowest in her financial history.
Rates shown are for informational purposes only and subject to change without notice. Products marked SI use simple interest, effective compound yield is lower than the stated rate. Minimum premiums shown are for non-qualified (after-tax) funds. Always verify current rates with a licensed annuity professional before purchasing.
- South Carolina’s flat 3% income tax rate, reduced from 7% effective 2024, is one of the lowest on annuity income in the nation.
- A 0.75% premium tax, among the lowest in the country, keeps annuity rates offered in SC highly competitive compared to higher-tax states.
- The South Carolina Life and Accident and Health Insurance Guaranty Association covers up to $300,000 per insurer, above the national average of $250,000.
- A retirement income deduction may be available for qualifying taxpayers, potentially reducing your effective rate below 3% on annuity distributions.
- SC’s low premium tax means carriers can offer more competitive crediting rates here than in states with higher premium tax burdens.
South Carolina Department of Insurance
The South Carolina Department of Insurance licenses all agents and carriers operating in the state. Before purchasing any annuity, verify that your agent holds a current SC license and that the issuing insurance company is admitted in South Carolina. You can check the live rate table to see which A-rated, SC-licensed carriers are currently offering the best rates.
| Contact | Details |
|---|---|
| Agency | South Carolina Department of Insurance |
| Consumer helpline | 803-737-6160 | Consumer hotline: 1-800-768-3467 |
| Website | doi.sc.gov |
| License verification | doi.sc.gov/agents-brokers/ |
How South Carolina Taxes Annuity Income
South Carolina taxes annuity withdrawals as ordinary income at its new flat rate of 3%, a dramatic improvement from the prior graduated structure that topped out at 7%. Qualified retirement income, including IRA-funded annuity distributions, is taxed at the same 3% flat rate, though a retirement income deduction may reduce the taxable amount for eligible retirees. The combination of a low income tax rate and a below-average premium tax makes South Carolina one of the most cost-efficient states in which to hold and draw from an annuity.
| Annuity Type | South Carolina Tax Treatment | State Rate |
|---|---|---|
| Non-qualified (after-tax funds) | Gains (interest only) taxed as ordinary income; principal returned tax-free | 3% |
| Qualified (IRA / 401k rollover) | 100% of distributions taxable; retirement income deduction may apply for qualifying taxpayers | 3% |
| Roth IRA annuity | Qualified distributions are fully tax-free | 0% |
| 1035 Exchange | No state or federal tax triggered on the exchange itself | N/A |
Tips for Buying an Annuity in South Carolina
- Take advantage of the new 3% rate window now. South Carolina’s rate reduction to 3% (from 7% in 2022) represents a generational shift in the tax burden on retirement income. Buying a MYGA today locks in your rate, and future withdrawals will benefit from this lower tax environment. Learn more about how to buy an annuity if you’re ready to get started.
- Verify your carrier is SC-licensed. Only insurers admitted to do business in South Carolina are covered by the state guaranty association. Check licensure at doi.sc.gov before signing a contract.
- Stay under $300,000 per carrier. The South Carolina state guaranty association covers up to $300,000, above average nationally. Still, if you’re investing more than that amount, spreading across two carriers adds an extra layer of protection.
- Compare MYGA rates against SC bank and credit union CDs. South Carolina’s low premium tax (0.75%) means insurers can offer more competitive rates here than in states like Minnesota (2.0%). Run a side-by-side comparison, the MYGA often wins on yield and adds tax deferral on top.
- Check whether the retirement income deduction reduces your effective tax rate. Qualifying SC retirees may be able to deduct a portion of retirement income, pushing their effective rate well below 3% on annuity distributions. Confirm eligibility with a CPA or tax advisor before your first withdrawal. Get a free quote and mention your tax situation so the right product is matched to your needs.
Frequently Asked Questions About Annuities in South Carolina
What is South Carolina’s income tax rate on annuity withdrawals?
South Carolina taxes annuity withdrawals as ordinary income at a flat 3% rate, effective 2024. This is a significant reduction from the prior graduated system, which topped out at 7%. A retirement income deduction may further reduce your taxable amount if you qualify.
What does South Carolina’s guaranty association cover?
The South Carolina Life and Accident and Health Insurance Guaranty Association protects annuity holders up to $300,000 per insurance company, higher than the $250,000 limit common in most states. Only contracts issued by carriers admitted to do business in SC are eligible for this protection.
Why are annuity rates in South Carolina often more competitive?
South Carolina charges a premium tax of only 0.75% on annuity premiums, one of the lowest rates in the nation. Because this cost is lower for insurers, they can pass along better crediting rates to policyholders. Compare current fixed annuity rates to see the difference.
How long is the free look period for annuities in South Carolina?
South Carolina requires a minimum 10-day free look period on annuity contracts. Within that window, you can cancel the contract and receive a full refund of your premium, no surrender charges or penalties apply.
Compare Annuity Rates in Other Southeast States
Shopping for the best rate? Guaranty association limits, premium taxes, and available carriers vary by state. Compare rates in nearby states to find the best fit for your retirement plan.
- Best Annuity Rates in Tennessee
- Best Annuity Rates in Kentucky
- Best Annuity Rates in North Carolina
- Best Annuity Rates in Mississippi
- Best Annuity Rates in Texas
- View All 50 State Rate Pages
You can also compare our current best fixed annuity rates or explore top 5-year MYGA rates nationwide.
