by Greg Yoder

The appropriations act that went into law at the end of 2019 included a number of significant tax measures. Most notable of these was the SECURE act, which — in addition to showing how far Congress will go for an acronym — made important changes to retirement plan provisions. Let’s look at a few of them:

• The age for beginning required minimum distributions (RMDs) has been raised to 72. In the past, taxpayers had to take their first distribution from most retirement plans in the year they reached 70 1/2 (even if they were still working). Now, if you reach age 70 1/2 after December 31, 2019, you can wait until the year you turn 72 to begin taking RMDs. The rule that allows you to defer the first distribution until April 1 of the year following the year you reach the minimum distribution age has not changed (but keep in mind that people who wait until the following year to take the first distribution will have to take two distributions in that year). Note that someone who turned 70 1/2 in 2018 or 2019 isn’t helped by this law. Life isn’t fair, and neither are taxes.
• There is no longer a maximum age for making contributions to a traditional IRA. Under old law, traditional IRA contributions were only allowed up until the year a taxpayer turned 70 1/2. Now, there’s no upper age limit. However, other restrictions still apply, so, for example, a taxpayer still needs earned income in order to make a traditional IRA contribution.
• There have been changes to post-death RMD rules for inherited IRAs and other retirement plans. Under the old tax law, when and how quickly RMDs had to be taken by the heir(s) of a retirement plan holder depended on a number of factors, including the age of the holder at death. Now, most beneficiaries will be required to receive the entire account balance of the plan within ten years of the date of death. As with many retirement plan provisions, there are a number of exceptions.
• While the minimum distribution age for IRAs has increased to 72, the qualified charitable distribution age remains 70 1/2. IRA owners who have reached 70 1/2 may transfer up to $100K each year to qualified charities. The transfer can reduce or eliminate the RMD and is not included in the owner’s taxable income.

There were plenty of other changes affecting retirement plans, and plenty of other changes to other areas of the tax law. For example:a number of provisions that were slated to expire were extended. These “extenders” include

• A number of energy-related incentives
• The 7.5% of AGI floor for medical expense deductions (the floor had been 10% of AGI and was scheduled to return to 10% for 2019)
• An above-the-line deduction for qualified tuition and some related expenses, and
• A special exemption for income from forgiveness of debt related to a principal residence.

As with most tax legislation, there were a number of other provisions that are highly technical and apply to limited numbers of taxpayers, and there are exceptions to pretty much everything. The above is a tiny sample of the provisions of the recent act. If you’re interested in any of its provisions and how they affect your tax situation, please get in touch with us.