How Will My QLAC Be Taxed?

• The taxation of a QLAC is like your 401(k) and traditional IRA, providing a tax deferred status
• A QLAC reduces your RMDs and the associated taxes with that
• QLACs are not taxed during their deferral period

Like your 401(k) and traditional IRA, QLACs also have a tax deferred status. This means that at purchase, you can move funds from your 401(k) or IRA without being taxed or penalized.

Additionally, you don’t pay taxes on your QLAC purchase during the deferral period. Since QLACs do not have an account value which increases over time (such as with interest), you don’t pay any taxes on interest or earned capital gains.

When your QLAC-generated income starts in retirement, the income payments will be taxed at regular income tax rates. The other benefit is that QLACs are exempt from required minimum distributions until age 85, so you can defer your income payments and taxes for longer with income from a QLAC.

When you purchase a QLAC, you have the option to choose a death benefit. This means that you can choose a beneficiary who will receive the difference in premium paid and income received, if there’s any remaining. If your beneficiary chooses to annuitize that remaining premium (instead of receiving it all at once), that income will be taxed at the regular income tax rate. This doesn’t apply if the payout is coming from a non-qualified annuity where the money has already been taxed!

_Disclaimer: This article is provided for informational purposes only and not for the purpose of sales, solicitation or inducement to purchase any annuity product.  Blueprint Income is not responsible for the accuracy of this information. If you wish to confirm the information contained herein, prior to making an annuity purchase, please consult with your tax advisor._