Retirement Plan Changes
The new spending bill incorporates specific text from the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. This bill is designed to encourage retirement savings for individuals in a multitude of ways and to make it easier for employers to offer retirement plans to their employees.
The new bill:
- increases the age after which required minimum distributions from certain retirement accounts must begin to 72 (from 70.5).
- allows penalty-free distributions from qualified retirement plans and IRAs for births and adoptions
- makes it easier for long-term, part-time employees to participate in elective deferrals
- allows certain home health care workers to contribute to a defined contribution plan or IRA
- requires beneficiaries of IRAs and qualified plans to withdraw all money from inherited accounts within 10 years
- and others!
We are finding this topic of interest recently as more and more retirement portfolios continue to grow under current economic conditions.
Health Care Taxes
The most popular repeal included the repeal of the Obamacare tax mandate. Additionally, the new bill:
- the Sec. 4980I excise tax on certain high cost employer health plans (the "Cadillac tax");
- the Sec. 4191 medical device excise tax; and
- the annual fee on health insurance providers contained in Section 9010 of the Patient Protection and Affordable Care Act
The three taxes, which were enacted to fund Obamacare, have now been repealed.
Disaster Tax Relief
Victims of natural disasters have been granted some relief through the recent spending bill. This specifically relates to those individuals who have been affected by a natural disaster in the most recent years: 2018, 2019, and up to 30 days after enactment of the bill. Such relief includes:
- protection for eligible taxpayers who make tax-favored withdrawals from retirement plans;
- an employee retention credit for eligible employers equal to 40% of qualified wages, which are paid to an employee during the time the employer's business is not operating due to a natural disaster;
- special rules for disaster-related personal casualty losses and for determining earned income for purposes of the Sec. 32 earned income tax credit;
- and also introduces an automatic 60-day filing extension for certain taxpayers affected by natural disasters.
Extenders
Below are some of the miscellaneous expired tax provisions that have been extended through 2020 via the spending bill. Those include:
- Sec. 108(a)(1)(E), which excludes from gross income the discharge of qualified principal residence indebtedness income;
- Sec. 163(h)(3), treatment of mortgage insurance premiums as qualified residence interest;
- the 7.5% (instead of 10%) adjusted gross income floor for medical expense deductions
- Sec. 222, which provides an above-the-line deduction for qualified tuition and related expenses
If you feel that some may apply to you, reach out to us so that we can discuss!
