Broker Check

2020 Year End Tax Planning

December 16, 2020

The CARES Act (2019) and the SECURE Act (2020) bring new planning opportunities. 

Below is a list of key changes:

Retirement Plan Withdrawals and Loans

  • Up to $100,000 may be withdrawn from qualified retirement accounts - IRA, 401(k) and 403(b), without early withdrawal penalty for Covid related purposes
  • Taxes due can be paid over 3 years
  • The distribution can be paid back within the 3 year period which will negate the tax on the distribution. 

Charitable Contributions

  • $300 charitable deduction for those who do not itemize
  • For those who itemize deductions, charitable deduction limit is increased up to 100% of Adjusted Gross Income (Does not apply to “Donor Advised Funds”)
  • For those over 70 ½ you can still send donations directly from your IRA up to $100,000

Required Minimum Distributions

  • No RMD required for 2020
  • RMD age increased to 72 years old
  • Consider a Roth Conversion of your normal RMD amount

Stretch IRA No Longer Allowed

  • Beneficiaries who inherit an IRA must withdraw the funds over a 10 year period, versus over their life expectancy under the old law.

Planning Opportunities related to “Loss of Stretch IRA”

  • Roth conversion for those who have beneficiaries in a higher tax bracket than the IRA owner
  • Charitable contributions made directly from IRA to the charity for those over 70 ½ of up to $100,000

Please call or email me if you would like to meet to discuss your specific situation.