Last updated: March 1, 2026 | Reviewed by My Annuity Store Editorial Team
Texas retirees have a tax advantage that residents of most other states simply don’t have: zero state income tax. Every dollar of annuity gain you withdraw is taxed at federal rates only, the state of Texas takes nothing. That changes the math on fixed annuities significantly, and it’s one reason Texas consistently ranks among the top states for annuity sales volume in the country.
Consider Bill, a 65-year-old retired oil industry manager in Houston with $400,000 to invest. In a high-tax state, a portion of his annuity distributions would go to state income tax every year. In Texas, that money stays in his pocket. Over a 15-year retirement, that difference compounds into real dollars, often tens of thousands more in after-tax income compared to the same annuity held by a retiree in California or New York.
Best Annuity Rates in Texas: 2026 Rate Table
The rates below are from A-rated carriers offering products to Texas residents as of March 2026. Texas’s moderate 1.75% premium tax keeps carrier pricing competitive, and the state’s size means strong product availability across term lengths.
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.
These rates apply to non-qualified money (personal savings, rollovers from CDs, etc.). IRA and 401(k) rollovers follow the same rate schedule, the difference is in how distributions are taxed, not the credited rate itself. See the live rate comparison table for the most current offers across all A-rated carriers writing Texas business.
How Texas Annuity Rates Are Affected by State Regulations
Texas charges a premium tax of 1.75% on annuity premiums received by the carrier. This is lower than California’s 2.35% but in the middle of the national range. A lower premium tax means carriers can credit slightly more competitive rates on Texas-issued contracts, a modest but real advantage for Texas buyers relative to higher-tax states.
The Texas Department of Insurance (TDI) regulates all annuity products sold in Texas. Products must be filed and approved by TDI before being offered to residents. Texas also follows NAIC suitability standards, which require agents to document that an annuity recommendation aligns with the buyer’s financial goals, liquidity needs, and time horizon.
Texas requires a minimum 20-day free look period for annuity contracts. During those 20 days, you can return the contract for a full refund of your premium, no questions asked. This is your window to read the fine print, particularly the surrender charge schedule and any market value adjustment (MVA) provisions, and make sure the product matches what you expected.
For buyers replacing an existing annuity or life insurance policy, Texas has additional disclosure requirements designed to ensure you understand what you’re giving up (such as existing surrender charges or guaranteed benefits) before switching carriers. An agent who skips this disclosure process in Texas is violating TDI rules.
Texas Life and Health Insurance Guaranty Association
The Texas Life and Health Insurance Guaranty Association (TLHIGA) provides backstop protection for Texas annuity owners if their carrier becomes insolvent. The coverage limit is $250,000 per covered life per carrier.
The association activates automatically when a carrier is declared insolvent and placed into receivership. There’s no application required on your part. TLHIGA either arranges a transfer of your contract to a healthy carrier or pays you the covered benefit amount directly, up to $250,000.
For larger investment amounts, the protection strategy is simple: spread your premium across multiple A-rated carriers. Bill, our $400,000 retiree in Houston, might split his investment into two $200,000 contracts with two different carriers. Both contracts fall fully within the $250,000 guaranty coverage, and he still gets competitive rates on both. Check our rate table for carriers currently writing Texas business at the best rates.
The guaranty association is a state-funded backstop, not a federal program, and it is not FDIC insurance. That said, it provides meaningful consumer protection. Sticking with A-rated and A+-rated carriers is your primary safeguard, financial strength ratings are the first filter, and guaranty coverage is the secondary backstop.
Annuity Tax Treatment in Texas
Texas has no state income tax. Full stop. When you withdraw money from a fixed annuity or MYGA in Texas, you owe federal income tax on the gains, and nothing to the state of Texas.
This is a meaningful advantage. For a retiree in the 22% federal bracket who is also subject to California’s 9.3% rate or New York’s 6.85% rate, annuity distributions cost them 31.3% or 28.85% respectively. The same Texas retiree pays 22% flat. Over a multi-year distribution period, that difference adds up to thousands of dollars annually.
For qualified annuities (funded with pre-tax IRA or 401(k) money), the full distribution amount is subject to federal income tax in the year of withdrawal. For non-qualified annuities funded with after-tax savings, only the gain, not your original principal, is taxable federally. The exclusion ratio calculation determines exactly how much of each payment is taxable.
Tax-deferred growth inside a multi-year guaranteed annuity delays the federal tax event until you actually withdraw. This is valuable even without a state tax component: money that would have gone to taxes stays invested and continues compounding inside the contract. For a $200,000 MYGA at 5.60% over five years, tax deferral on the accumulating interest adds meaningfully to the ending balance versus a taxable account growing at the same rate.
Texas also has no inheritance tax, which simplifies the tax picture for annuity death benefits. Beneficiaries still owe federal income tax on any untaxed gains they receive, but there’s no Texas estate or inheritance tax layer on top of that.
How to Buy an Annuity in Texas: Step by Step
- Identify your goal and time horizon. Are you parking a CD rollover for 3 years? Locking in rates for 7 years while other assets grow? Looking for lifetime income? The answer determines whether a short-term MYGA, a longer fixed annuity, or an income annuity is the right fit. For guaranteed growth with a fixed end date, a fixed-rate annuity is typically the cleanest solution.
- Compare live rates across A-rated carriers. Use our rate comparison tool to see what carriers are offering Texas residents right now. Rates move frequently, sometimes weekly, so always check current rates rather than relying on quotes more than a few days old.
- Request a free, no-obligation quote. Our quote request form connects you with personalized illustrations from multiple carriers. The illustration shows your guaranteed rate, projected account value at maturity, surrender charge periods, and free withdrawal provisions.
- Review the contract during your free look period. Texas gives you 20 days. Use them to read the surrender charge schedule (typically declining over the contract term), understand the free withdrawal provision (most contracts allow 10% per year without penalty), and confirm any MVA provisions that could affect the surrender value if you need to exit early.
- Fund the contract and designate beneficiaries. Fixed annuities pass outside of probate through beneficiary designation. Make sure your beneficiary designations are current and correctly reflect your wishes. For an IRA-funded annuity, work with your custodian to execute a direct rollover to avoid triggering a taxable distribution.
For a full step-by-step explanation of the purchase process, see our guide on how to buy an annuity.
Frequently Asked Questions About Annuities in Texas
Does Texas tax annuity income?
No. Texas has no state income tax, so annuity withdrawals are only subject to federal income tax. This is one of the most significant advantages Texas retirees have over counterparts in high-tax states. The savings compound over a multi-decade retirement: a retiree taking $30,000 per year from an annuity in Texas keeps thousands more each year compared to the same retiree in California or New York.
What is the guaranty association coverage limit in Texas?
The Texas Life and Health Insurance Guaranty Association covers up to $250,000 per covered life per carrier. For investments exceeding $250,000, the standard approach is to split premiums across two or more financially strong carriers. Every dollar above the coverage limit at a single carrier carries unprotected risk in the unlikely event of insolvency, spreading the investment eliminates that exposure.
How does Texas’s premium tax compare to other states?
Texas’s 1.75% premium tax is moderate, lower than California (2.35%) but similar to many other large states. It has a minor effect on the credited rates carriers offer in Texas versus extremely low-tax states, but the difference is typically less than 0.10% and is far outweighed by other factors like the absence of state income tax on withdrawals.
Can I roll a 401(k) or IRA into an annuity in Texas?
Yes. You can roll a 401(k) or traditional IRA directly into a fixed annuity or MYGA without triggering a taxable event, as long as you use a direct rollover (custodian-to-carrier transfer). The annuity then holds the IRA assets on a tax-deferred basis. Distributions in retirement will be subject to federal income tax. Texas does not add a state tax layer. Work with your plan administrator to initiate a direct rollover, never take a distribution first and then try to reinvest it, as that triggers a 20% federal withholding requirement.
