Birthdays sometimes bring new rights, responsibilities, benefits and liabilities. Voting, driving a car and Social Security benefits spring to mind, but here are some others:
The kiddie tax no longer applies. The tax continues to apply to children under the age of 24 if they are full-time students whose earned income is less than half the child’s support. The unearned income (interest, dividends, capital gains) in excess of $2,200 of a child subject to the kiddie tax is taxed at rates that apply to estates and trusts. The highest 37% bracket applies to unearned income in excess of $12,750 in 2019.
Funds remaining in an education savings account must be distributed by this time. If not used for qualified education expenses, the beneficiary is taxed on the earnings. The tax can be avoided by rolling over the account to another family member under age 30.
A $1,000 catch-up IRA contribution may be made, in addition to the regular $6,000 IRA contribution. For 401(k) plans, the catch-up is $6,000, making the maximum contribution $25,000 for 2019.
Withdrawals from IRAs are no longer subject to the 10% early distribution penalty.
Social Security retirement may begin, but payments are reduced. If the recipient continues working, benefits are reduced by $1 for each $2 of earned income in excess of $17,640 (2019 amount).
The standard deduction increases by $1,650 for single taxpayers and by $1,300 for married taxpayers (2019 amount).
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