There’s a lot of action going on right now in the tax world. Here are 3 quick summaries of some recent rulings:
IRS Clears up Confusion About Direct Rollovers to Roth IRAs
Beginning this year, if you’ve got an AGI (adjusted gross income) of $100,000 or less, you can roll your company pension plan contributions into your Roth IRA. It’s a taxable event, but it isn’t subject to the 20% withholding (unlike other taxable payouts). These rollovers must be allowed by the pension plan.
50% Bonus Depreciation Applies to Heavy SUVs
If gas prices aren’t an issue and you still want that big SUV, this year may be the year to buy. Not only do you get the $25,000 deduction under Section 179, this year you can also take an additional 50% of the balance as a depreciation deduction. Qualifying vehicles would be those weighing over 6,000 lbs, pickup trucks with long beds (6 ft or more) and panel style delivery trucks (think UPS vans). You’ve got buy and put the vehicle into service this year to take the $25,000 deduction, and you’ve got to buy a brand new vehicle to get the extra 50% bonus deduction (used vehicles still get the $25,000 amount).
IRA Payout Rules for Non-Spousal Heirs Relaxed (a bit)
When you inherit an IRA from someone who isn’t your spouse, you’ve got a couple of choices over how to get at the money. You can take it all over a 5-year period, or you can spread it out over your lifetime. Until now, you’ve had to begin the lifetime option within 12 months of the donor’s death, or be stuck with the 5-year payout instead. But in a recent IRS private letter ruling a taxpayer who missed the 12-month deadline was allowed to take a catch-up withdrawal and pay a 50% penalty. For the taxpayer the steep penalty was worth it, as she planned to take the IRA proceeds out slowly, over a 50+ year period.