QLACs – Taxable Income?
The intent of us opening a QLAC is to use it a part of our strategy to reduce our Tax Deferred assets subject to RMDs and to provide a part of funding for Long Term Heath Care.
If I convert $125,000 of my Rollover IRA into a QLAC, is the amount treated on the 1040 as line 15a (taxable) or 15b (Nontaxable) when calculating Line 37 Adjusted Gross Income?
Are there any age restrictions on converting IRAs to a QLAC?
Permalink Submitted by Alan - IRA critic on Thu, 2018-12-27 17:32
When you purchase a QLAC, you would typically just do a non reportable transfer into an IRA annuity at the insurance company providing the QLAC. This is not a taxable event, since the QLAC is still a traditional IRA, a deferred annuity IRA. RMDs are not required so the value of the QLAC contract is not included in the RMD calculation for other IRA accounts. Around age 85 payments from the QLAC will commence, and that is when taxable income will rise since distributions are pushed back into these advanced age years. If LTC costs also rise after the QLAC distributions begin, the itemized medical deduction may offset the additional taxable income from the QLAC distributions.