Internal Revenue Service United States Department of the Treasury
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Important Changes This Year


SECURE Act of 2019

The changes included in the SECURE Act of 2019 (Setting Every Community Up for Retirement Enhancement), which was part of the Further Consolidated Appropriations Act, 2020, are summarized below:

  • Certain taxable non-tuition fellowship and stipends – For tax years beginning after December 31, 2019 certain taxable non-tuition fellowship and stipend payments are treated as compensation for the purpose of IRA contributions. Compensation will include any amount included in gross income and paid to aid in the individual’s pursuit of graduate or postdoctoral study.
  • Repeal of maximum age for traditional IRA contributions – Many older taxpayers can now choose to contribute some or all of their compensation to a traditional individual retirement arrangement (IRA). Starting in 2020, the new law eliminated the long-standing 70½ age limit for making contributions to traditional IRAs. There is no age limit for contributions to a Roth IRA. As a result, people over age 70½ who are still working or running a business can now choose to contribute to a traditional IRA beginning in 2020. A qualified charitable distribution (QCD) can be made by a taxpayer who is age 70 ½ or older (unchanged). However, the excludible portion of a QCD is reduced by IRA deductions once the taxpayer attains age 70½. This provision applies cumulatively for tax years beginning after 2019 as to both distributions and deductions.
  • Penalty-free withdrawals from retirement plans for individuals in case of birth of child or adoption – Beginning in 2020, an IRA owner or a participant in a workplace defined contribution plan, such as a 401(k) or 403(b) plan, can withdraw up to $5,000 for the birth or adoption of a child without incurring the usual 10% additional tax on early distributions. The distribution must be made within one year after the child is born or the adoption is finalized and cannot be from a defined benefit plan. Any time after receiving the distribution, the IRA owner or plan participant may generally recontribute any portion of the distribution as a rollover contribution to an eligible retirement plan, including an IRA. The term “eligible adoptee” means any individual (other than a child of the taxpayer’s spouse) who has not attained age 18 or is physically or mentally incapable of self-support.
  • Required minimum distributions (RMDs) – The required minimum distribution (RMD) age increased from 70 ½ to 72 for taxpayers turning 70 ½ after December 31, 2019. In other words, if a taxpayer’s 70th birthday is July 1, 2019 or later, they do not have to take withdrawals until reaching age 72. For those who were age 70½ or younger on Jan. 1, 2020, their first RMD is not due until April 1 of the year after they turn age 72. For example, for those who turn 72 on July 1, 2021, they must take their first RMD (for 2021) by April 1, 2022, and their second RMD (for 2022) by December 31, 2022.
  • Modification of required distribution rules for designated beneficiaries – There are new required minimum distribution rules for designated beneficiaries upon the death of the IRA owner after December 31, 2019. All distributions must be made by the end of the 10th year after death, except for distributions made to certain eligible designated beneficiaries.
  • Difficulty of care payments – Beginning in 2019, taxpayers can elect to increase their compensation for difficulty of care payments that are excluded from gross income for the purpose of nondeductible IRA contributions.
  • Expansion of Section 529 plans – 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 a designated beneficiary to participate in an apprenticeship program that is registered and 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.