SECURE Act & Tax Extenders Passed
The SECURE Act (Setting Every Community Up for Retirement Enhancement Act of 2019) was signed into law on December 20th. It previously passed the U.S. House of Representatives in July 2019 and then the Senate on December 19th. It is a bi-partisan bill designed to help Americans save for retirement. Below is a brief summary of some of the provisions. We will bring you more detailed explanations and planning opportunities in 2020.
- The Required Minimum Distribution age was increased from 70 ½ to 72, starting on January 1, 2020. Only those who turn 70 ½ in 2020 or later may wait until age 72 to begin taking required distributions. This law change does not affect those who turned 70 ½ in 2019 or earlier.
- The age restriction has been lifted for those wishing to make Traditional IRA contributions, starting with the 2020 tax year. Formerly, contributions could only be made by individuals under age 70 ½.
- Stretch IRAs have been changed to require that funds are distributed from Inherited Retirement Accounts within 10 years of the death of the original account holder instead of the former rules which allowed disbursements to be spread over the lifetime of the beneficiaries. There are exceptions for beneficiaries who are the surviving spouse, disabled, chronically ill, individuals who are not more than 10 years younger than the original account holder and minors. Minors can delay their 10-year distribution timeframe until they reach the age of majority.
- Penalty-free withdrawals of up to $5,000 are now allowed from retirement plans for the birth or adoption of a child.
- Retirement benefits are allowed for long-term, part-time employees.
- There is an increase in tax credits for small businesses offering their employees retirement plans.
- An expansion of 529 education-savings plans will allow for penalty-free withdrawals of up to $10,000 for the repayment of certain student loans.
The government has also extended some tax laws that had previously expired, including the following:
- Medical expenses in excess of 7.5% of AGI can be deducted as an itemized deduction. This was set to rise to 10% in 2019, however it will remain at 7.5% for 2019 and 2020.
- The deduction of Qualified College Tuition which ended in 2017 was extended for 2018, 2019 and 2020.
- The $2-million exclusion for debt forgiveness on a home was extended for 2018, 2019 and 2020.
- Energy Efficient Home Credits were extended for 2018, 2019 and 2020.
- Many business credits and tax incentives were also extended
You can speak with your accountant if you should have qualified for beneficial tax treatment in 2018, as it may make sense to amend in order to obtain the benefit.
We are happy to discuss how these changes may affect you and we will continue to keep you informed of planning strategies.
Our mission is to help our clients protect, preserve, and enhance their wealth. We achieve this by combining our investment management expertise with our financial planning services. Our co-management approach offers customization of portfolios and client involvement. As a fee only advisor, we do not sell any products and therefore, provide unbiased advice. Our clients always come first.