December 23, 2014
Are you aware of the numerous age-related provisions in the IRS code? They are probably more plentiful and significant than you thought. Here are a few examples of the age-related tax rules that could affect you and your dependents.
* At birth up to age 19 and even 24: dependency deduction. Parents can claim a dependency exemption for a child under 19 or for full-time students under the age of 24.
* Under 13: child care credit. This provision gives parents a tax credit for dependent care expenses.
* Under 17: child tax credit. If parental adjusted gross income is below a threshold level, parents can claim a child tax credit of $1,000.
* At 50: retirement contributions. The government allows extra "catch up" contributions to retirement savings. This is a helpful provision to encourage savings.
* Before age 59½: early withdrawal penalty. Withdrawals from IRAs and qualified retirement plans, with some exceptions, are assessed a 10% penalty tax.
* At 65: increased standard deduction. Uncle Sam grants a higher standard deduction, but there's no additional tax benefit if the taxpayer itemizes deductions.
* At 70½: mandated IRA withdrawals. The IRS requires minimum distributions from a taxpayer's IRA beginning at this age (doesn't apply to Roth IRAs). This starts to limit tax-deferral benefits.
Awareness of how the tax code affects you and your family at different ages is important. For tax planning assistance through the various phases of life, contact us.
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