Retirement Planning

Tax Provisions to be Aware of in Retirement

The IRS continues to add and change tax laws that could impact you in retirement. Find out which may affect you and how to plan for them.

Tax Provisions to be Aware of in Retirement

Did you know that the IRS continues to adjust more than 50 tax provisions every year?1 With the constant flux of new rules and tax laws, it has never been more important to learn how certain tax liabilities can affect your retirement income.

Whether you're pre-retirement, still planning for retirement, or living in retirement, here are six tax provisions that you should know about when planning for your golden years.

  • The IRA rollover limit.

    As of 2015, you will be limited to only one IRA rollover per calendar year, regardless of how many IRAs you own.2 With a rollover, you transfer money out of one Qualified retirement plan into another (such as a traditional IRA). The tax consequence for completing more than one rollover will result in your income being taxed, as well as a 10 percent penalty if you're under age 59½.

  • Social Security taxation.

    How much Social Security taxation you can expect depends on your total income. The higher your income is, the more taxes you'll pay on your benefits. For example, if you and your spouse file a joint return with a combined income between $32,000 and $44,000, up to 50 percent of your benefits may be taxable. If your combined income is more than $44,000, you could be taxed as high as 85 percent.3

  • The state inheritance tax.

    In 2018, the federal estate tax exemption (the amount of money you can pass onto to your heirs tax free) has increased to $10 million - double that for a married couple.4 However, depending on your state of residence, your state of residence, your estate may be subject to a state inheritance tax. This additional state tax means that your heirs may be forced to give up a sizable chunk of their inheritance when you pass away.

  • The personal exemption elimination.

    As part of the 2018 tax reform, you will no longer be able to claim a personal exemption for yourself, your spouse, on any dependents. 

  • Itemized deduction increase.

    While deductions for personal exemptions have been suspended as of 2018, the Standard Deductions for all filers have increased.

  • The health insurance penalty.

    You're probably aware that if you don't have health insurance you'll pay a penalty.  To see how the fee is calculated, visit Healthcare.gov.

1.  https://www.irs.gov/newsroom/in-2018-some-tax-benefits-increase-slightly-due-to-inflation-adjustments-others-unchanged
2.  https://www.irs.gov/retirement-plans/ira-one-rollover-per-year-rule
3. https://www.ssa.gov/planners/taxes.html
4.  https://www.irs.gov/businesses/small-businesses-self-employed/whats-new-estate-and-gift-tax

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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

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Neither Protective Life nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax‐related decisions. For information about Protective Life and its products and services, visit www.protective.com.

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