Should I Skip My RMD This Year?
As part of the economic relief legislation passed to help with the coronovirus, Congress removed the requirement that people age 70 1/2 and older take their required minimum distribution this year. This leaves many taxpayers wondering, should I skip my RMD this year. Tax Benefits of Skipping RMD This Year Usually anyone above the age of 70 1/2 years old is required to withdraw a minimum amount from their tax-advantaged accounts each year. The amount is calculated based upon an IRS provided actuarial table, and the amount of money in the taxpayer’s accounts. The calculated amount must be withdrawn from the accounts, and becomes taxable income. Higher taxes are the result for most people. The main benefit of skipping the required minimum distribution is lower taxes for the 2020 tax year. Distributions from non-Roth IRA, tax-advantaged accounts such as IRAs and 401ks are taxable income. Not only do taxpayers have to be taxes on the distribution, but the money withdrawn increases the taxpayers overall taxable income. The higher taxable income may reduce or eliminate certain tax deductions or credits that are limited to taxpayers with lower incomes. The $1,200 stimulus payment itself was limited to taxpayers with incomes under $75,000 …
