In December 2019, the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) was signed into law. It included a number of changes to the Tax Code. Some of the notable provisions are detailed below
Old Law: Withdrawals from 529 Plans that were not used to pay qualified education expenses were generally subject to income tax and penalty
New Law: : Withdrawals taken out to repay student loans are tax-free and penalty-free (up to a lifetime limit of $10,000). Note: Wisconsin currently does not follow federal law regarding this provision, so you could incur taxable income on the Wisconsin return. Please check with your advisor before making a student loan payment with 529 funds
2017 Law: Children with unearned income* were taxed partially at their own tax rates and partially at their parents' rates
2018 Law: Children with unearned income were taxed at Trust & Estate tax rates
New Law: Back to 2017 rules. Unearned income will be taxed partially at the child's rates and partially at the parents' rates
*Unearned income includes taxable interest, ordinary dividends, capital gains (including capital gain distributions), rents, royalties, taxable scholarships, etc.
Old Law: At the age of 70.5 you were required to take a minimum amount from most types of retirement accounts each year (excluding Roth IRAs). Accounts subject to RMDs generally include: IRAs, 401(k)s, 457 plans, 403(b)s, etc.
Current law allows you to make Qualified Charitable Distributions from a Traditional IRA if you are 70.5 or older. The SECURE Act did not change this. We anticipate there may be a change to increase the age from 70.5 to 72 to match the RMD rules. More clarification will come from the IRS. If you are younger than 72, we recommend consulting your tax advisor before making any Qualified Charitable Distributions
Old Law: If you inherited certain types of retirement accounts, you had the opportunity to "stretch" distributions from the account over your life expectancy. This resulted in relatively small distributions each year when compared to the total account balance
New Law: If you inherit a retirement account from someone who passed away on or after 01/01/2020, the account generally must be fully liquidated within ten years*
There are exceptions to this law for spouses, minor children, disabled or terminally ill individuals, and beneficiaries less than ten years younger than the decedent. Ask your advisor for details
Old Law: A person could not contribute to an IRA once he or she had reached age 70.5
New Law: There is no longer an upper limit on the age at which an individual can contribute to an IRA, as long as he or she has earned income
The IRS released new tax withholding tables and a redesigned Form W-4 for 2020 to reflect changes in the tax code. Some employers are encouraging employees to complete the new W-4. If your company is not requiring this updated form, you do not have to file an updated W-4 with your employer. Your current withholding will stay the same until the new W-4 is submitted. Talk to your tax advisor to see if you should complete a new W-4
Note: Please include your two most recent paystubs when you submit your tax documents to us for completion of your tax return. These will help your advisor determine if you should adjust your withholding
To learn more about the professional history of our financial advisors, please visit FINRA's BrokerCheck.
Services offered only where licensed to do business. Currently licensed in AZ, CA, CO, CT, DC, FL, GA, HI, IA, IL, IN, LA, MA, MD, MI, MN, MO, MT, NC, NE, NM, NV, NY, OH, OR, PA, RI, SC, SD, TN, TX, VA, WA, WI
Securities and Advisory Services offered through Harbour Investments, Inc., Member FINRA & SIPC Mennenga Tax and Financial and Harbour Investments, Inc. are not affiliated entities. Harbour Investments, Inc. does not offer tax or legal advice.