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Qualifying Relative — Definition and IRS Guidelines A qualifying relative is a person you may claim as a dependent on your federal tax return if they meet specific IRS tests. Claiming a qualifying relative can affect your eligibility for certain tax benefits, though personal exemptions for dependents are suspended for tax years 2018–2025 under the…

Qualifying ratios: what they are and how they work Qualifying ratios are percentages lenders use to assess a borrower’s ability to repay a loan by comparing debt obligations to income. They play a central role in underwriting and help determine whether an applicant is approved and on what terms. Common qualifying ratios Debt-to-income ratio (DTI,…

Qualifying Investment A qualifying investment is an asset purchased with pretax income—typically through contributions to retirement accounts—whose taxes are deferred until the investor withdraws funds. These investments reduce taxable income in the contribution year and can provide tax advantages by shifting tax liability to retirement, when the investor’s tax rate may be lower. Key takeaways…

Qualifying Event (Health Insurance): What It Is and How It Works What is a qualifying event? A qualifying event (also called a qualifying life event) is a change in personal circumstances that lets you enroll in or change health insurance outside the regular open enrollment period. Without a qualifying event, you generally must wait for…

What is a qualifying disposition? A qualifying disposition is the sale, transfer, or exchange of stock that meets specific holding‑period rules and therefore receives favorable tax treatment. These shares are most commonly acquired through incentive stock options (ISOs) or a qualified employee stock purchase plan (ESPP). Key points Qualifying dispositions generally result in long‑term capital…

Qualifying Annuity: What It Is and How It Works A qualifying annuity is an annuity contract approved for use inside a qualified retirement plan or an individual retirement account (IRA). It can be fixed, indexed, or variable depending on the plan sponsor’s objectives. When held inside a qualified plan or traditional IRA, contributions and earnings…

Qualified Widow or Widower (Qualified Surviving Spouse) A qualified widow(er), now officially called a Qualified Surviving Spouse, is an IRS tax filing status that lets a surviving spouse use the married filing jointly tax rates and standard deduction when filing an individual return for up to two years after the year their spouse died. Key…

Qualified Trust: What It Means and How It Works Key takeaways * A qualified trust is an employer-established stock bonus, pension, or profit‑sharing plan that receives favorable tax treatment when it meets IRS requirements. * To be qualified, the trust must be valid under state law, name identifiable beneficiaries, and provide the plan administrator/custodian a…

Qualified Terminable Interest Property (QTIP) Trust Key takeaways A QTIP trust provides lifetime income to a surviving spouse and preserves the remainder for beneficiaries named by the original grantor. It is typically irrevocable and frequently used by people with children from multiple marriages. Assets in a QTIP qualify for the federal marital deduction and are…

Qualified Special Representative Agreement (QSR) Key takeaways * A QSR lets one broker‑dealer clear trades on behalf of another without using the Nasdaq ACT matching system. * Under a QSR, the delivering broker sends trade details directly to the National Securities Clearing Corporation (NSCC) via the receiving broker’s clearing arrangement. * Benefits: faster settlement, lower…

Qualified Retirement Plans: Definition, Types, and Tax Benefits What is a qualified retirement plan? A qualified retirement plan is an employer-sponsored savings arrangement that meets requirements under the Internal Revenue Code and ERISA. Qualification gives the plan and its participants favorable tax treatment, including tax deductions for contributions (in many cases) and tax-deferred growth on…

Qualified Reservist: Meaning, Rules, Pros and Cons Definition A qualified reservist is a member of a military reserve who is called to active duty for a qualifying period and, as a result, may take early distributions from certain retirement accounts without incurring the usual 10% early-distribution penalty. These distributions remain subject to federal (and possibly…

Qualified Professional Asset Manager (QPAM) Key points * A QPAM is a registered investment adviser (RIA) that manages institutional retirement assets and can rely on an ERISA exemption to engage in transactions otherwise prohibited for plan-related parties. * QPAMs commonly handle pension plans and private placements, and may also manage real estate and other alternative…

Qualified Production Activities Income (QPAI) Qualified Production Activities Income (QPAI) is the portion of a U.S. taxpayer’s income that is attributable to domestic manufacturing and production activities. It was the basis for the domestic production activities deduction (DPAD) under former Internal Revenue Code Section 199. How QPAI is calculated Domestic production gross receipts (DPGR): gross…

Qualified Pre-Retirement Survivor Annuity (QPSA) Key takeaways A QPSA is a death benefit that provides a life annuity to a surviving spouse (or a person treated as a surviving spouse under a QDRO) when a participant dies before beginning retirement benefits. QPSAs apply only to qualified retirement plans and are governed by ERISA. The participant…

Qualified Personal Residence Trust (QPRT) A qualified personal residence trust (QPRT) is an irrevocable trust designed to remove a personal residence from the grantor’s taxable estate while allowing the grantor to live in the home for a specified term. By retaining a temporary right to occupy the property (a “retained interest”), the grantor reduces the…

Qualified Opinion A qualified opinion is an auditor’s conclusion included in the auditor’s report that the company’s financial statements are fairly presented except for a specified issue. It signals either a limitation on the audit scope or a material departure from generally accepted accounting principles (GAAP) that is not pervasive to the financial statements as…

Qualified Mortgage: Definition, Rules, and What Borrowers Should Know Key takeaways * A qualified mortgage (QM) meets standards established after the 2007–2008 mortgage crisis to ensure borrowers can afford loans and to limit risky lending practices. * QM rules are rooted in the Dodd‑Frank Act and aim to protect both borrowers and lenders; loans that…

Qualified Longevity Annuity Contract (QLAC) Key takeaways * A QLAC is a deferred annuity purchased with funds from a qualified retirement account (such as a 401(k), 403(b), or IRA). * It defers a portion of required minimum distributions (RMDs) and provides guaranteed lifetime income starting on a preset date (no later than the annuitant’s 85th…

Qualified Joint and Survivor Annuity (QJSA) A Qualified Joint and Survivor Annuity (QJSA) is a retirement benefit option that provides lifetime income to a plan participant and a survivor (typically a spouse, but can be a child or dependent) from a qualified retirement plan. QJSAs are commonly associated with defined benefit plans, money-purchase pension plans,…

Qualified Institutional Placement (QIP) Qualified Institutional Placements (QIPs) are a method for listed companies—primarily in India and nearby markets—to raise capital quickly from domestic institutional investors. Introduced by the Securities and Exchange Board of India (SEBI) in 2006, QIPs were designed to encourage companies to tap domestic funding sources rather than relying on overseas markets….

Qualified Institutional Buyer (QIB) What is a QIB? A Qualified Institutional Buyer (QIB) is an institutional investor deemed sufficiently sophisticated to participate in markets for restricted and control securities without the same regulatory protections given to retail investors. The designation grants access to certain private-market trading avenues, most notably transactions under Rule 144A. Qualification criteria…

Qualified Higher Education Expense (QHEE) Key takeaways * A Qualified Higher Education Expense (QHEE) is an amount paid to enroll or attend an accredited postsecondary institution and can be used to claim certain education tax benefits. * Typical QHEEs: tuition, required fees, course materials and supplies (including laptops when required), and other charges required for…

Qualified Foreign Institutional Investor (QFII) Key takeaways * QFII lets licensed foreign institutional investors trade yuan‑denominated “A” shares and other approved securities on China’s mainland exchanges. * Launched in 2002 to open China’s capital markets; quota limits were progressively relaxed and eliminated in 2019. * CSRC and SAFE have eased eligibility and repatriation rules to…

Qualified Exchange Accommodation Arrangements (QEAA) A qualified exchange accommodation arrangement (QEAA) is a tax strategy used in conjunction with Section 1031 of the Internal Revenue Code to defer capital gains tax on the sale of real estate. In a QEAA, a third party—known as an exchange accommodation titleholder (EAT) or accommodation party—temporarily holds either the…

Qualified Eligible Participant (QEP): What it Means and How It Works Overview A Qualified Eligible Participant (QEP) is an investor who meets regulatory thresholds that permit participation in sophisticated investment vehicles such as futures-based funds and many hedge funds. The QEP designation is defined under Rule 4.7 of the Commodity Exchange Act (CEA) and identifies…

Qualified Electric Vehicle: What It Is and How It Works What is a qualified electric vehicle? A qualified electric vehicle is a plug-in electric passenger vehicle or light truck that may qualify the owner for a nonrefundable federal tax credit (up to $7,500). To qualify, a vehicle generally must: * Have at least four wheels…

Qualified Domestic Trust (QDOT) What is a QDOT? A Qualified Domestic Trust (QDOT) is a special type of trust that lets a surviving spouse who is not a U.S. citizen claim the federal estate tax marital deduction for assets placed in the trust. Without a QDOT, a non‑citizen surviving spouse generally cannot receive the unlimited…

Qualified Domestic Relations Order (QDRO) A Qualified Domestic Relations Order (QDRO) is a court-issued legal order used most commonly in divorce proceedings to divide retirement plan assets. It recognizes that an alternate payee—typically a spouse, former spouse, child, or other dependent—is entitled to receive a specified portion of a participant’s retirement plan benefits. Key points…

Qualified Domestic Institutional Investor (QDII) Overview A Qualified Domestic Institutional Investor (QDII) is an institutional investor that has been authorized to invest in securities outside its home country. QDII programs open controlled channels for large domestic institutions—such as banks, insurance companies, funds, trust companies, and securities firms—to place capital in foreign markets on their own…

Qualified Dividends What is a qualified dividend? A qualified dividend is an ordinary dividend that meets specific IRS requirements and is taxed at the lower long-term capital gains rates (0%, 15%, or 20%) instead of ordinary income rates. Corporations report dividends to shareholders on IRS Form 1099‑DIV. Explore More Resources › Read more Government Exam…

Qualified Distribution A qualified distribution is a withdrawal from a tax-advantaged retirement account that meets Internal Revenue Service (IRS) rules for being penalty-free and, in some cases, tax-free. Common accounts that allow qualified distributions include traditional IRAs, Roth IRAs, 401(k)s, and 403(b)s. Rules differ by account type; knowing them helps avoid income taxes and the…

Qualified Disclaimer Definition A qualified disclaimer is an irrevocable, unqualified, written refusal to accept an interest in property that meets the requirements of the Internal Revenue Code (IRC §2518). When properly executed, the disclaimed property is treated for federal gift, estate, and generation-skipping transfer (GST) tax purposes as if the disclaimant never received it. How…

Qualified Charitable Organization Overview A qualified charitable organization is a nonprofit that meets the Internal Revenue Service (IRS) requirements under Internal Revenue Code section 501(c)(3). These organizations operate exclusively for recognized exempt purposes—such as religious, charitable, scientific, literary, educational, testing for public safety, the prevention of cruelty to children or animals, or the development of…

Qualified Automatic Contribution Arrangements (QACAs) Qualified Automatic Contribution Arrangements (QACAs) are employer-sponsored, opt-out retirement plan features created by the Pension Protection Act of 2006 to boost participation in defined contribution plans such as 401(k), 403(b), and 457 plans. Under a QACA, employees are automatically enrolled at a default deferral rate (at least 3%) unless they…