Though we’ve now entered the year 2021, individuals still have the opportunity to make some last-minute financial moves while keeping tax planning in mind. Because of the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019; the Coronavirus Aid, Relief, and Economic Security (CARES) Act; and the U.S. Treasury’s revised life expectancy regulations for required minimum distributions (RMDs), it might be necessary to rethink some of the traditional tax strategy moves for 2020 and 2021.


The maximum contribution to an individual’s traditional IRAs is limited to $6,000 ($12,000 with the addition of a spousal account) for tax years 2020 and 2021. If the taxpayer isn’t covered by an employer-sponsored qualified retirement plan (QRP), he or she may elect to treat the IRA contribution as a deduction for adjusted gross income (AGI). If the taxpayer or spouse is covered by a QRP, a deductible contribution can still be made for those whose modified AGI is below the threshold (adjusted annually for inflation) or if the deductible contribution is within the phase-out area of the threshold.

In addition, these thresholds vary by the filing status of the taxpayer. (A complete list of the modified AGI limits are provided in IRS Publication 590-A, which can be found on For example, a single or head of household taxpayer can take a full deduction if his or her modified AGI is $65,000 or less for 2020 ($66,000 or less for 2021) and is phased out ratably for modified AGI amounts between $65,000 and $75,000 for 2020 (between $66,000 and $76,000 for 2021).

Prior to 2020, individuals weren’t permitted to contribute to their traditional IRAs once they attained the age of 70 and a half, even if they were gainfully employed. This same age restriction, however, didn’t apply to contributions to a Roth IRA. But now, SECURE Act §107 repealed the age restriction for contributions to IRAs for those individuals (and their spouses) who are still working, beginning with taxable year 2020. Thus, taxpayers can contribute to their IRA up to the time of filing their 2020 tax return and claim the deduction for that contribution. The rationale offered in the report from the House Committee on Ways and Means is worth noting:

“As Americans live longer, increasing numbers of Americans are continuing to work past traditional retirement ages. This provides such working individuals with current income, as well as the potential for additional retirement savings. An individual working past age 70½ may contribute to an employer-sponsored retirement plan, if available, or to a Roth IRA, but not to a traditional IRA. The Committee decided to remove this impediment to retirement savings.”

This contribution not only benefits the taxpayer with future retirement income but also provides a tax deduction for the current year. Of course, many taxpayers may not be able to financially take advantage of this tax provision in 2020 or possibly 2021 given the impact COVID-19 is having on many taxpayers’ household income.


Both the SECURE Act and CARES Act provide changes to the RMD rules that significantly impact financial planning decisions for individuals in both 2020 and 2021. For tax year 2020 only, CARES Act §2203 suspends the RMD rules for IRAs as well as for defined contribution plans, including IRC §401(a), §403(a), §403(b), and certain §457(b) plans. Thus, individuals aren’t required to take their minimum distribution for 2020 but may if they want. The application of this suspension appears to be straight-forward, but there are some issues to be mindful of for tax planning.

Beginning with tax year 2020, SECURE Act §114 increases the age at which a person must begin taking his or her RMD from 70 and a half to 72. Since the CARES Act suspended the RMD requirement for 2020, many taxpayers may be confused as to whether the suspension or age change applies to them. Let’s look at the application of these rules.

CARES Act §2203(a) provides a temporary waiver of the RMD rules for 2020. This waiver applies to any distribution that would have been required in calendar year 2020 because the taxpayer attained the age of 72 in 2020 and didn’t make such a distribution before January 1, 2020. Therefore, if a taxpayer turned 70 and a half in 2019 and took his or her RMD before January 1, 2020 (instead of waiting to April 1, 2020), the waiver doesn’t apply to that distribution. In other words, there is no tax provision allowing these taxpayers to put back the RMD amount that was taken from their IRA in 2019. But the waiver does allow them to skip taking their second RMD that’s due by December 31, 2020.

Taxpayers who turned 70 and a half in 2019 but delayed taking the RMD to April 1, 2020, were able to take advantage of the waiver and thereby skip taking their first RMD in 2020. But when do they need to take their first RMD? Since the RMD requirements don’t apply to any distribution that’s required to be made in calendar year 2020 (because of the CARES Act), the taxpayer isn’t required to take the 2020 distribution that’s due by December 31, 2020. Instead, he or she must take the 2021 RMD by December 31, 2021. And a taxpayer who turns 72 in 2020 isn’t required to take the 2020 RMD by April 1, 2021, but will be required to take the 2021 RMD by December 31, 2021, since that’s a 2020 RMD.

In addition, the Treasury Department has issued REG-132210-18, which will impact all taxpayers taking RMDs after 2020. This proposed regulation updates the life expectancy tables to reflect the longer life expectancies. For example, a 75-year-old surviving spouse who uses the Single Life Table to compute his or her RMD would now use a life expectancy of 14.8 instead of 13.4. This change allows taxpayers to take smaller RMDs over time and thus extend the available funds in their retirement plan over a longer period.

Tax planning is an art, and the impact of the SECURE Act, CARES Act, and proposed Treasury Regulations make that art more challenging. Although these rules are taxpayer-friendly by allowing taxpayers to delay and extend their RMDs, that does assume that taxpayers have the adequate income or retirement savings to take advantage of these new rules.

© 2021 A.P. Curatola

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