Qualified Annuity

A qualified annuity is the termed used in the financial concepts and can be defined as a financial product that accepts the funds and grows these funds. The qualified annuity is funded by using pre-tax dollars that means the funds with which the qualified annuity is funded haven’t deducted tax from them and as a result the qualified annuity become eligible for the tax deduction from the funds that are used to fund the annuity. The term qualified used in the name of the annuity describes the fact that the annuity is qualified for the tax deduction. The descriptor Qualified is granted as the part of the name of the annuity by Internal Revenue Service IRS for the indication of the eligibility of the annuity for tax deduction. The qualified annuity also depicts that whenever a distribution is made it is subject for the deduction of the income tax.

Another type of annuity also exits that is called as the non-qualified annuity. The non-qualified annuity is totally opposite to that of a qualified annuity. A non-qualified annuity is funded with after tax dollars that means that the tax has been already deducted from the dollars before using them as funds for funding the annuity. The distribution resulting from a non-qualified annuity is not subject to the income tax that is totally opposite to the concept of the qualified annuity. Qualified annuities are usually set up or planned by the employers for the sake of their employees and used as the part of their retirement plan.

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