Congress just passed two very important pieces of legislation – the SECURE Act & the CARES Act. Both have many important provisions. Some of the financial planning highlights are below*:
SECURE ACT (Setting Every Community Up for Retirement Enhancement) 12/20/2019:
- RMDs delayed to 72 from 70.5;
- IRA contributions may continue past age 70.5 (Earned income requirements still apply.);
- Most non-spouse IRA beneficiaries must distribute all funds by end of 10th year after IRA owner’s death;
- 401(k) plans may offer annuities;
- 529s may be used for apprenticeships, student loan payments, and other elementary & secondary education costs;
- Children’s unearned income taxed at parent’s marginal tax rate;
- Several changes to employer retirement plans making them more accessible and cost effective.
CARES ACT (Coronavirus Aid, Relief, and Economic Security) 3/27/2020:
- 2020 RMDs for IRAs & 401(k)s suspended;
- Based on the 2019 tax return (2018 if not filed), many individuals will receive up to $1,200 (phased out beginning at $75,000 of AGI for single filers & $150,000 for joint), plus $500 per child 16 or under.
- Caveat- payment is an advance on a 2020 refundable tax credit;
- The April 15th tax filing deadline moved to July 15th (SWM ALL CLIENT EMAIL 3/27/2020);
- First quarter 2020 estimated tax payments are postponed to July 15th;
- For tax filers who itemize, 2020 charitable deduction limit increased; for those using the standard deduction, up to $300 may now be deducted for AGI;
- Unemployment benefits expanded to the self-employed, independent contractors, and others; increased by $600/week up to 4 months;
- 401(k) loan limit increased to $100,000 from $50,000;
- 10% early withdrawal (up to $100K) penalty from retirement plans waived for coronavirus-related purposes, retroactive to January 1st; may claim this income over 3-years;
- Coronavirus-related retirement fund distributions may be repaid within 3 years;
- Federal student loan payments & interest accrual suspended until September 30th;
- Paycheck Protection Program helps small businesses make payroll and cover other expenses (www.sba.gov).
*Please consult your tax preparer or CPA for guidance on your specific situation or for information on additional provisions.
This Commentary is provided by Spraker West Wealth Management, a registered investment advisor, and is for informational purposes only. It should not be construed as investment advice and is not intended as a solicitation of any specific product or service. Investments and/or investment strategies include risk including the possible loss of principal. There is no assurance that any investment strategy will achieve its objectives. Information provided is not intended as tax or legal advice and should not be relied upon as such. You are encouraged to seek tax or legal advice from a qualified professional.