Are You More SECURE with The New Tax Law?

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On December 20, 2019, President Trump signed into law the “Setting Every Community Up for Retirement Enhancement” Act or “SECURE” Act for short. This law includes several provisions related to retirement and college savings plans to make it easier and less costly for employers to set up and more accessible for employees to save for retirement. There are also items that help older individuals stretch their savings, so they have less chance of outliving their assets.

Here are highlights of the new SECURE Act.

Retirement Provisions 

  • Repeal of maximum age for contributions to traditional IRA’s (previous age limit was 70.5).
  • Required minimum distributions start at age 72 instead of age 70.5 (not applicable for those that turned 70.5 before December 31, 2019).
  • Up to $5,000 can be distributed penalty-free for birth of child or adoption from IRA’s or defined contribution plans.
  • Non-spouse inherited IRA’s required to take distributions over 10 years instead of beneficiary’s lifetime. There is no requirement to take distributions during the first 9 years, rather, the account has to be emptied by the end of the 10th year.

 

Other Provisions

  • Kiddie tax reverts back to pre-TCJA and no longer uses trust tax rate tables. Applies to 2020 and future years but can be elected to apply to both 2018 and 2019.
  • Increase in various failure to file penalties for returns due after December 31, 2019.
  • Retroactive repeal of parking tax for tax-exempt organizations that provide transportation fringe benefits.
  • Up to $10,000 of 529 plan funds can be used to pay down student loans. The $10,000 is a lifetime limit per beneficiary.

 

What Was Not Included

  • The Secure Act does not address drafting errors made when the TCJA was signed into law. For example, the error related to the depreciable life of Qualified Improvement Property was not addressed.
  • The different effective dates for net operating loss deductions (NOL’s) was not updated. This may impact certain fiscal year taxpayers.

 

Extenders

  • Extensions of the following expired or expiring credits through 2020:
  • New Markets Tax Credit
  • Work Opportunity Tax Credit
  • Biodiesel and Renewable Diesel Credit (extended through 2022)
  • Alternative fuel and fuel mixture credit
  • Repeal of health insurance plans “Cadillac” tax.
  • Extension of the PCORI fee (excise tax) on self-insured health plans through 2029.
  • Section 179D deduction for Energy Efficient Commercial Buildings through 2020.
  • Energy Efficient Homes Tax Credit under Section 45L for homes produced before January 1, 2021.
  • Deduction for mortgage insurance premiums for 2018, 2019, and 2020.
  • Deduction for qualified tuition and fees deduction for 2018, 2019, and 2020.

 

We would be happy to discuss how these changes affect you and could help you to become more SECURE financially!

 

 

Kathi Koenig, CPA
Partner – McGowen Hurst Clark Smith
p. 515.288.3279
e. KKoenig@mhcscpa.com

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A little more about us:
Located in West Des Moines, Iowa with a branch office in Winterset, Iowa, McGowen Hurst Clark Smith (MHCS) celebrates 70 years of extending excellent service to our clients, providing them with accounting, auditing, consulting and financial planning expertise.

Established in 1946, our staff has grown from 3 to 60 employees, making us large enough to provide our clients with a broad base of experience and resources, yet small enough to offer very personalized service—which we feel makes us stand apart from other CPA firms. In addition to the traditional services of Accounting, Tax Preparation, Audit and Business Consulting, MHC&S offers our clients specialized services including Estate Planning, Business Valuations, Cost Segregation Studies, Retirement Planning, QuickBooks Training, Financial Advisory Services, Fraud Detection and Deterrence, Business Succession Planning, Litigation Support and more.

MHCS is a member of CPAmerica International, Inc., a national association of accounting firms offering membership to only 90 firms throughout the United States. This association offers a wide pool of additional technical expertise to the members firms, as well as continuing professional education necessary to maintain the degree of excellence which MHCS feels is vital in today’s business environment.

For more information about our firm, please visit our website or check us out on Facebook.

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