Contributing to a traditional IRA
Starting in 2020, the new law eliminated the age limit for making contributions to traditional IRAs. This means many older taxpayers can now choose to contribute some or all of their compensation to a traditional individual retirement arrangement (IRA).
There is no age limit for contributions to a Roth IRA.
Distributions can start later
If you have a traditional IRAs, as well as 401(k) plans and other workplace retirement plans, you may be able to wait until age 72 before taking required minimum distributions (RMDs) from your IRAs and plans.
Birth or adoption of a child
Beginning in 2020, If you have an IRA or a participant in a workplace defined contribution plan, such as a 401(k) or 403(b) plan, You can withdraw up to $5,000 for the birth or adoption of a child without incurring the usual 10% additional tax on early distributions.
More expenses now qualify for tax-free and penalty-free withdrawals from a qualified tuition program, also known as a 529 plan.
Amounts can be withdrawn to pay principal or interest on a designated beneficiary’s or their sibling’s student loan.
The amount of distributions for loan repayments of any individual is limited to $10,000 lifetime.
Interest paid with these funds does not qualify for the student loan interest deduction.
In addition, a 529 plan can now be used to pay qualifying expenses for an apprenticeship program that is certified by the U.S. Department of Labor.
Qualifying expenses are expenses for required fees, books, supplies and equipment. Because these changes are retroactive to 2019, any distributions during 2019 that meet these guidelines also qualify for tax-free and penalty-free treatment.
go to www.cswestcpas.com to learn more.