Tax Milestone, your local store probably carries special cards for the birthdays that tend to be milestones in ordinary life. Although taxpayers shouldn\’t expect to receive cards from the IRS, some birthdays are especially important for tax purposes, too.
Birth. You generally can start claiming a dependency exemption for your child in the year he or she is born. In 2013, the exemption is $3,900, subject to phaseout for higher income taxpayers
13. The child care credit is available to eligible working parents until the year their child turns 13. The credit is 20% to 35% of employment related child care expenses, depending on income. The maximum amount of expenses eligible for the
credit is $3,000 for one child and $6,000 for two or more.
17. A child tax credit is available until the year a child turns age 17. The maximum credit is $1,000 per qualified child, and it is phased out above certain income amounts.
19. Your child may continue to qualify as your dependent until the year he or she reaches age 19. If your child is enrolled as a full-time student for some part of five calendar months during the year, then he or she can qualify as your
dependent until age 24.
591/2. You won\’t have to worry about the 10% penalty tax on early withdrawals from Column 2 tax-deferred retirement accounts and traditional individual retirement accounts (IRAs) once you reach age 591/2.
65. If you claim the standard deduction instead of itemizing your deductions, you can celebrate your 65th birthday with an
additional standard deduction. For 2013, the additional standard deduction is $1,200 for a married individual (filing jointly or separately) or a surviving spouse \\\\ and $1,500 for a single or head-of-household taxpayer.
Starting in 2013, itemized medical expenses generally are deductible only to the extent they, in aggregate, exceed 10% of adjusted gross income. However, if you or your spouse has reached age 65 before the end of the year, a 7.5%-of-AGI floor
applies to your medical expense deduction.
701h. After you reach age 701/2, annual required minimum distributions (RMDs) from traditional IRAs and employer retirement plans generally must start and they represent taxable income. (Your plan may allow you to delay RMDs if you are
still working for the company sponsoring the plan and you are not a 5% owner.) If you wish, you can have as much as $100,000 transferred tax free from your IRA to qualified charities in 2013. Your contribution would count toward your RMD,
even though you wouldn\’t be taxed on the contributed funds.
In-plan Roth Rollovers
Traditionally, 401(k) plans have offered employees the opportunity to save for retirement by making pretax salary deferrals. Over the last several years, many 401(k) plans have added Roth contribution programs to give participants the ability to save after-tax dollars that eventually qualify for tax-free distributions (including any Roth contribution
Another enhancement some 401 (k) plans have made is to allow participants to roll over certain distributable amounts from regular plan accounts to Roth accounts within the plan. In-plan Roth rollovers are taxable in the year they are made.
The tax law enacted early this year adds a new twist: Employers may amend their plans to permit in-plan Roth rollovers of amounts not otherwise distributable under the plan. For example, a 401(k) plan could permit current employees younger than age 591/2 to roll over their pretax salary deferrals to a plan Roth account even though those deferrals would ordinarily not be distributable to the employees.