2020 Marks New Tax Law Changes

Happy new year from LWH CPAs!

2020 marks a new year and many tax law changes have occurred that we believe may have a direct impact on you. Such changes include:

RETIREMENT

·         Effective 2020:  no age limit on contributions to an IRA if you have earned income (previously prohibited after turning 70 ½).

·         Effective 2020:  mandatory age to begin distributions from an IRA now 72 (up from 70 ½).

·         IRAs inherited from people (other than your spouse and a few other exceptions) who passed away after 2019 must now be distributed within 10 years of death.

·         Stipends and fellowship now qualify the recipient to make IRA contributions.

·         Up to $5,000 may be withdrawn from a retirement plan without penalty for the birth or legal adoption of a child, for up to one year after birth or adoption.  Note that the amount withdrawn is still taxable, but may be redeposited without penalty, and if redeposited within 60 days of withdrawal is not even taxable.

COLLEGE/CHILDREN

·         You may now withdraw up to $10,000 total during your lifetime from a 529 plan to repay student loans of the account beneficiary (or siblings) without tax or penalty.

·         Children are once again retroactively taxed at their parent’s tax rates instead of the potentially higher trust tax rates.

·         The tuition and fees deduction has been retroactively restored for 2018-2020.

·         A 529 can be used tax free to pay for an apprenticeship program if it is approved as such.

OTHER

·         The deduction for mortgage insurance premiums has been retroactively restored.

·         The deduction for medical expenses has been restored to a lower threshold.

·         The credit for installing an electric car charger has been restored.

These are just some of the year-end tax law changes that may impact your tax situation. Please contact us for specific information on how these new tax law changes may impact you.