IRS Form 1098-Q – In the world of retirement planning, Qualifying Longevity Annuity Contracts (QLACs) offer a strategic way to secure income in later years while providing tax advantages. If you’re involved with these contracts, you’ve likely encountered IRS Form 1098-Q, also known as Qualifying Longevity Annuity Contract Information. This form plays a crucial role in reporting and tracking QLACs for tax purposes. In this comprehensive guide, we’ll break down what Form 1098-Q is, its purpose, key details, and how it impacts your taxes. Whether you’re a contract holder or an issuer, understanding this form can help ensure compliance and optimize your retirement strategy.
What Is a Qualifying Longevity Annuity Contract (QLAC)?
A Qualifying Longevity Annuity Contract, or QLAC, is a specialized type of deferred annuity designed to provide income starting later in life, typically at age 80 or 85. QLACs are funded from retirement accounts like IRAs or 401(k)s, allowing individuals to defer required minimum distributions (RMDs) on a portion of their savings. This deferral can reduce current tax liabilities and provide a hedge against longevity risk—the possibility of outliving your savings.
Under IRS rules, QLACs have specific limits: As of 2026, you can invest up to the lesser of $200,000 (adjusted for inflation) or 25% of your retirement account balance in a QLAC. The contract must meet criteria such as providing lifetime payments and not including certain features like cash surrender values. Importantly, prior to annuitization, the QLAC’s value is excluded from the account balance used to calculate RMDs, offering significant tax deferral benefits.
QLACs are particularly appealing for retirees seeking guaranteed income in advanced age, but they require careful planning to comply with regulations.
Purpose of IRS Form 1098-Q
IRS Form 1098-Q is an informational return used to report details about contracts intended to be QLACs. Its primary purpose is to notify the IRS and the contract holder about the QLAC’s status, value, and other key attributes. This helps ensure that the contract qualifies for RMD exclusions and that any future distributions are properly taxed.
Unlike forms that report taxable income directly (like Form 1099-R for distributions), Form 1098-Q focuses on the contract’s setup and ongoing value. It’s labeled as “Info Copy Only,” meaning recipients don’t need to file it with their tax returns but should retain it for records. For issuers, filing this form confirms the contract’s QLAC status, aiding in regulatory compliance.
The form is typically issued annually until the contract annuitizes, at which point distributions may be reported on other forms.
Who Must File and Receive Form 1098-Q?
Who Files It?
Insurance companies, financial institutions, or other issuers of annuity contracts must file Form 1098-Q with the IRS for any contract intended to qualify as a QLAC. This includes reporting for the year the contract is purchased and subsequent years as needed. Filing is required even if no distributions occur, as the form documents the contract’s value and features.
Issuers must submit the form electronically if they file 10 or more information returns, per IRS guidelines. Penalties for non-filing can apply, starting at $50 per form and escalating based on the delay.
Who Receives It?
Contract holders (annuitants) receive a copy of Form 1098-Q by January 31 of the following year. This serves as confirmation of the QLAC’s details, such as premiums paid and the annuity start date. Recipients use this information to verify RMD calculations and prepare for future taxable events.
If you’re a QLAC holder, expect to receive this form from your annuity provider. It’s not something you file, but it can support your tax records if audited.
Key Boxes on Form 1098-Q and What They Mean
Form 1098-Q includes several boxes that detail the QLAC’s specifics. Here’s a breakdown based on the latest IRS structure (Rev. April 2025):
- Box 1a: Annuity Amount on Start Date – This shows the expected monthly or periodic payment amount once the annuity begins.
- Box 1b: Annuity Start Date – The date when payments are scheduled to commence, often in the format MM/DD/YYYY.
- Box 2: Start Date May Be Accelerated – A checkbox indicating if the annuity start date can be moved earlier under certain conditions, such as terminal illness.
- Box 3: Total Premiums – The cumulative premiums paid for the contract during the year.
- Box 4: Fair Market Value (FMV) of QLAC – The end-of-year value of the contract, which is excluded from RMD calculations.
- Boxes 5a to 5l: Monthly Premiums – These break down premiums paid each month (January to December), providing a detailed payment history.
The form also includes payer and recipient information, such as names, addresses, and taxpayer identification numbers (TINs). At the top, it notes that the information is submitted to the IRS to report the QLAC’s status.
Recipients should review these boxes for accuracy and contact the issuer if discrepancies arise.
How Form 1098-Q Affects Your Taxes?
For contract holders, Form 1098-Q doesn’t directly trigger taxable income but supports tax planning. The key benefit is the RMD deferral: By excluding the QLAC’s FMV from your retirement account balance, you may lower your required distributions and associated taxes in earlier retirement years.
Once payments begin, distributions from the QLAC are typically taxable as ordinary income and reported on Form 1099-R. If the QLAC includes joint and survivor benefits, a divorce after purchase doesn’t affect its qualifying status, per IRS instructions.
Always consult a tax professional to integrate this form into your overall return. For example, if you’re over age 73 (the RMD age as of 2026), confirm that your custodian has properly excluded the QLAC value.
Filing Deadlines and Requirements for Issuers
Issuers must furnish copies to recipients by January 31 and file with the IRS by February 28 (or March 31 if filing electronically). Extensions may be requested using Form 8809.
Recent updates: As of January 2026, there are no major changes to Form 1098-Q, but issuers should monitor for adjustments to QLAC dollar limits or rules under the SECURE 2.0 Act. The form and instructions are available on the IRS website for download.
Common Questions About Form 1098-Q
- Do I need to include Form 1098-Q on my tax return? No, it’s informational only. Keep it for your records.
- What if I don’t receive the form? Contact your annuity provider. They are required to send it.
- Can QLACs be purchased with non-retirement funds? No, they must come from qualified retirement accounts to qualify for RMD deferral.
- Are there penalties for non-qualifying contracts? If a contract fails QLAC rules, it may lose tax benefits, leading to retroactive RMD adjustments.
Conclusion: Leveraging Form 1098-Q for Smarter Retirement Planning
IRS Form 1098-Q is an essential tool for managing Qualifying Longevity Annuity Contracts, ensuring tax compliance, and maximizing retirement income. By understanding its details, you can better navigate RMDs and secure your financial future. For personalized advice, consult a financial advisor or tax expert. Stay informed by checking the IRS website for the latest forms and instructions.
Note: This article is for informational purposes only and not tax advice. Tax laws can change, so verify with official sources.