QLAC tax deferral refers to the ability to exclude premiums paid into a qualified longevity annuity contract from required minimum distribution calculations until income starts. By shifting a portion of IRA or plan assets into a QLAC, retirees can reduce the account balance used to compute RMDs, thereby lowering taxable distributions in the years before QLAC payouts begin. This deferral does not eliminate taxation; it postpones it until annuity income flows, which is then taxed as ordinary income. The strategy can be particularly attractive for retirees who do not need full RMD income early in retirement and who want guaranteed income later in life.

Advisors discuss QLAC tax deferral when modeling retirement income and tax scenarios. Planning software may show side-by-side projections with and without a QLAC, demonstrating differences in RMD amounts, taxable income, and portfolio longevity. Coordination with CPAs ensures that clients understand contribution limits, reporting requirements, and how QLAC values appear on custodial statements. Advisors also consider how deferral interacts with Medicare premium brackets, Social Security taxation, and estate goals. Clear explanation of QLAC tax deferral helps clients avoid the misconception that income is tax-free, emphasizing instead that taxation is merely shifted to later years when guaranteed payments commence.