Age Matters in Tax Law

Many tax provisions are linked to age, so whenever there’s a birthday in the family, check for changes to take into account as you do your tax planning. Major age milestones include the following:

• 13 – Your child no longer qualifies for the child care tax credit.

• 17 – Your child no longer qualifies for the child tax credit (different from the child care credit above

• 18 – Your child’s Coverdell education savings account is not permitted to accept new contributions (except in the case of special needs beneficiaries). Additionally, you must pay social security taxes for any of your children that you employ in an unincorporated business.

• 19 – Is your child a full-time student? Unless you answer “yes,” you could lose the dependency deduction once your child reaches this age.

• 24 – None of your child’s investment income will be taxed at your rate under the “kiddie tax” rules.

• 30 – Any amount remaining in your child’s Coverdell education savings account must be distributed or rolled over to an education savings account for another qualifying family member.

• 59 ½ – You may start withdrawing money from your IRA, 401(k), and other retirement plans without penalty.

• 65 – You generally qualify for a higher standard deduction. Additionally, low-income seniors may qualify for a special tax credit.

• 70 ½ – You must start withdrawing at least a required minimum amount from your IRA each year to avoid a stiff penalty. (This requirement doesn’t apply to Roth IRAs.)