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Frequently Asked Questions

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Q: Are Social Security claiming ages different for widows or divorcees?

A:  Widows and divorcees have the same full retirement age (FRA) as everyone else.  However, widows (or surviving divorced spouses) can claim survivor benefits as early as age 60. Divorcees can claim benefits at age 62 even if the ex-spouse (age 62 or older) has not filed yet for benefits. Note: you must have been divorced for at least two years prior to filing for spousal benefits on an ex-spouse’s record. There is a reduction in benefits for survivors and divorced spouses for claiming earlier than their full retirement age.

Q: At what age do I need to start taking Required Minimum Distributions?

A:  You will need to start taking the required minimum distribution (RMD) at age 72. The beginning age for RMDs changed in December of 2019 with passage of the SECURE Act.  Prior to 2020, RMDs started in the year you turned 70 1/2.

Do not confuse the age at which you are required to take a minimum distribution (72) with the age at which you can take a distribution without penalty (59 ½).

Also, your RMD must be withdrawn by 12/31 each year. However, the IRS gives you an extra three months the first time you are required to take an RMD (until 4/1 of the following year).

Here’s the problem with that: Suppose you turn 72 in 2020, but you wait until 4/1/2021 to take your 2020 RMD. You would still be required to take your 2021 RMD by 12/31/2021, so you end up taking two RMDs in the same calendar year. This could push you into a higher tax bracket. So, I recommend withdrawing your RMD by 12/31 of the year you turn 72, and then by 12/31 of every year thereafter.

Q: Can a 529 plan have multiple owners and multiple beneficiaries?

A:  No. Each account has a single owner and a single beneficiary.

  • A husband and wife cannot even be joint owners for their child. One parent is the account owner and a successor owner can be named in case the original owner dies.
  • You need a separate account for each beneficiary. In other words, you would need three separate accounts, if you have three kids. However, you can change the beneficiary on any account at any time to another family member.
  • Anyone can contribute to a 529 account. Therefore, parents and grandparents could contribute to the same account, or they could have separate accounts for the same beneficiary.
  • States that offer a state tax deduction for contributions may only offer that to the account owner. Therefore, it is possible that you are missing out on a potential tax deduction if you contribute to a 529 account you do not own.

Q: Can I contribute to an IRA if I also contribute to a 401k or other company-sponsored retirement plan?

A: Yes, you can contribute to a traditional IRA, but before you do, let’s make sure the deduction is going to be tax-deductible. Your contribution will not be deductible if you are an “active participant” in a company-sponsored retirement plan and you earn above the following thresholds:

IRA AGI Limits If contributor is a participant in a company-sponsored retirement plan, deduction is phased out between:
2020 2021
Single $65,000 – $75,000 $66,000 – $76,000
Joint (MFJ) $104,000 – $124,000 $105,000 – $125,000
Contribution for non-participating spouse $196,000 – $206,000 $198,000 – $208,000

NOTE: The answer above refers to contributions to a traditional IRA. A ROTH IRA works differently. The only factor  that determines if you can contribute to a ROTH is your income. You can contribute to a ROTH, regardless of participation in a company retirement plan, if your income is below the following thresholds:

ROTH IRA AGI Limits Full Contribution is allowed if below this range of income or phased out in this range:  
2020 2021
Single $124,000 – $139,000 $125,000 – $140,000
Joint (MFJ) $196,000 – $206,000 $198,000 – $208,000
Married filing separately $0 – $10,000 $0 – $10,000

Q: Can I contribute to an IRA if I am over 72?

A:  YES, as long as your have “earned income”. This is true for IRAs and workplace retirement plans, such as 401ks.

Q: Can I deduct the mortgage interest if I refinance and increase my loan balance?

A:  Only interest on the remaining acquisition indebtedness balance is deductible unless the increase in loan balance is used to substantially improve the property. Acquisition indebtedness is a loan used to acquire, build, or improve your home.

For example: Suppose you have a remaining $400k balance left on your mortgage. You refinance and borrow a total of $500,000.  The interest on the original $400k is deductible.  However, the interest on the additional $100k would not be deductible unless the additional funds are themselves used to substantially improve the residence.

Q: Can I deduct the mortgage interest on a Home Equity Line of Credit (HELOC)?

A:  Possibly.  In general, interest expense from a Home Equity Line of Credit (HELOC), is not deductible (after 2017), unless the loan was used to buy, build or substantially improve the home that secures the loan (primary residence or 2nd home). In addition, total mortgage interest expense is only deductible on the first $750k in total mortgage debt. HELOC debt used to pay personal expenses (e.g. credit cards, cars, vacations) is no longer deductible.

Q: Can I deduct the mortgage interest on a rental property?

A:  Yes. This works a bit differently than the home mortgage interest deduction, which is an itemized deduction subject to its own limitations and phase-outs. The interest deduction on a rental property is not limited to $750k in mortgage debt, but rather is an expense deductible against rental income. Losses on rental properties (when expenses exceed rental revenue) are only deductible up to a limit (see passive activity rules) and disallowed losses may be carried forward.

Q: Can I deduct the mortgage interest on a vacation home?

A: Yes! You can deduct the interest on your primary residence and one additional home provided that the total acquisition indebtedness does not exceed the thresholds ($750k for properties purchased after 12/15/2017). You would only be able to deduct a portion of your mortgage debt if you exceeded the deductible threshold. For example.  If you bought a home (or primary and 2nd home) in 2018 or later and had total acquisition indebtedness of $1.25 million, you could only deduct 60% of the mortgage interest ($750,000 / $1.250,000 = 60%).

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