Overview of some of the main features:
- Changes in IRA Contributions and Distributions:
- Maximum age of 70 ½ for making traditional IRA contributions repealed, beginning in 2020. Now you will be able to make these contributions at any age as long as you have eligible compensation.
- Compensation for IRA purposes expanded to include non-tuition fellowship and stipend payments beginning in 2020.
- New $5,000 per person penalty-free distribution allowed from your qualified plan related to the qualified birth or adoption.
- Increase in required minimum distribution (RMD) age:
- from age 70 ½ to age 72 based on when your date of birth falls:
- If it is before July 1, 1949, the RMD rules beginning at age 70 ½ apply to you.
- If it is on or after July 1, 1949, the RMD rules beginning at age 72 apply to you.
- Stretch IRAs Eliminated:
- Stretch IRAs are eliminated for non-spouse beneficiaries of qualified plan participants and IRA owners who die after December 31, 2019.
- Under new rules, the IRA/plan assets must be distributed within ten years following the plan participant’s or IRA owner’s death for most non-spouse beneficiaries. Other exceptions apply.
- Section 529 education savings plans have been expandedto include:
- Distributions to pay for fees, books, supplies, and equipment required for your designated beneficiary’s participation in an apprenticeship program
- Tax-free distributions of up to $10,000 to repay principal or interest on a qualified education loan of your designated beneficiary, or a sibling of your designated beneficiary.
- The Kiddie tax rules enacted under the Tax Cuts and Jobs Act (TCJA) for tax years beginning in 2018 have been repealed.
- In 2018 the TCJA resulted in dependents’ unearned income to be taxed at higher trust rates.
- Starting in 2020, the unearned income of your dependent children is taxed under the pre-TCJA rules, and not at the higher trust and estate rates.
- 2018 returns can be retroactively amended.
If you have any questions on these new rules, please do not hesitate to contact us. We are available to help you navigate and plan around the new rules.