By Nick Hopkins, CPA, CFP®
Partner, Director of Tax Services
[email protected]
On December 20, the President signed into law the “Setting Every Community Up for Retirement Enhancement Act” (the “Secure Act”) and the “Taxpayer Certainty and Disaster Tax Relief Act of 2019” (the “Disaster Act”) as part of an omnibus spending package, the “Further Consolidated Appropriations Act, 2020” (H.R. 1865, PL 116-94). Below are some highlights of the major provisions included within these Acts.
The Secure Act expands the opportunities for individuals to increase their savings and simplifies the administration of the retirement system. The Act makes the following changes:
- Increases the age to 72 (previously 70.5) after which required minimum distributions (RMD’s) must be taken from certain retirement plan accounts
- Simplifies the rules for small business owners to set up “safe harbor” retirement plans that are less expensive and easier to administer
- Makes it easier for long-term, part-time employees to participate in elective deferrals
- Allows the use of 529 accounts for qualified student loan repayments
- Allows penalty-free distributions from qualified retirement plans and IRA’s for births and adoptions
- Removes the provision known as the “stretch IRA,” which has allowed non-spouses inheriting retirement accounts to stretch out disbursements over their lifetimes (the new rules will require a full payout from an inherited IRA within 10 years of death)
The Disaster Act provides relief for taxpayers affected by disasters in 2018 through January 19, 2020, and also extends over 30 Code provisions, generally through 2020. Some of the more commonly extended Code provisions include:
- Treatment of mortgage insurance premiums as qualified residence interest
- Reduction in medical expense itemized deduction floor
- Deduction of qualified tuition and related expenses
- Credit for non-business energy property
- Credit for alternative fuel refueling property
- 2-wheeled plug-in electric vehicle credit
- Credit for electricity produced from certain renewable resources
- Energy efficient homes credit
- 179D energy efficient commercial buildings deduction
- Extension of alternative fuels excise tax credits
- New markets tax credit
- Employer tax credit for paid family and medical leave
- Work opportunity tax credit
The Further Consolidated Appropriates Act, 2020, Division N, also repealed several ACA excise taxes including:
- Repeal of the 2.3% medical device excise tax
- Repeal of the health insurance provider’s fee
- Repeal of the high-cost employer sponsored health coverage tax
If we can assist you further with better understanding these provisions and how they may affect you or your business, please call Nick Hopkins at (317) 608-6695 or email [email protected].