On March 11, the Oklahoma City Thunder was scheduled to play the Denver Nuggets. That was almost 12 weeks ago. Since then so many things have changed. And as the world figures out how to get back to business with all of the new rules (or guidelines, if you prefer), I thought we might review a few changes that may directly affect your planning this year.
Included in the new CARES Act, there have been some temporary adjustments to some old rules:
- The Required Minimum Distribution (RMD) for retirement accounts has been suspended. That means you are not required to take money from your qualified retirement account this year, based on reaching age 72 (formerly age 70 ½).
- The tax penalty for taking an early withdrawal from a qualified account (before age 59 ½ in an IRA or 55 for some employer sponsored retirement accounts), has been suspended up to certain limits.
Any time the rules change, we want to pause and ask a basic question: Does this change present an opportunity to improve our results for the coming year?
Some thoughts on taxes going forward
We are currently witnessing the largest government fiscal response to a crisis since the Great Depression. No matter where you stand on how it’s being done or how much is being spent, we all need to be aware that the source of all this stimulus will come from our future. Let me be clear - it is very possible that taxes will go up.
Believing that the tax rates we have now are potentially lower than the rates we will have in years to come may give us the potential to choose to pay some taxes at the current lower rates. No one I know enjoys paying taxes, but if we get an opportunity to minimize the pain, it is worth investigating.
Of course, as is the case with most changes to tax rules, it’s complex and any change in your strategy needs to be thought through with the assistance of your tax professional. We are always happy to work together with your trusted tax advisor to discover what will work best for your unique situation.
This is also a good place to remind those over 70 ½ that charitable contributions can be made from an IRA to a qualified charity. Utilizing this method can provide additional tax advantages for some and can be explored with us and/or your CPA.
If you want to make sure you are making the most of the new rules and keeping as much of your hard-earned income as possible, let us help.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.