The end of 2019 saw Congress and the President agree on a significant piece of legislation, the Setting Every Community Up for Retirement Enhancement (SECURE) Act, adding onto the changing tax landscape we’ve seen in recent years. Some components extend or alter provisions established on a temporary basis by the Tax Cuts and Jobs Act (TCJA) of 2017, while others are entirely new tax law. Overall, the package is taxpayer-friendly. More notable provisions of the SECURE Act are explored here.

Personal taxes

  • Homeowners can continue to treat their qualified mortgage insurance premiums as deductible mortgage interest. The deduction begins to phase out when adjusted gross income (AGI) exceeds $100,000 ($50,000 if married filing separately). This deduction had expired at the end of 2017. You must itemize your personal deductions to take advantage of this tax benefit.
  • Homeowners who’ve undergone foreclosure, short sale, loan modification, or otherwise have had mortgage debt forgiven, can exclude up to $2 million of the debt from taxable income ($1 million for married individuals filing separately). The debt generally must have resulted from the acquisition, construction, or substantial improvement of your principal residence. The law also modifies the exclusion to make it apply to debt discharged under a binding written agreement entered into before January 1, 2021. Before this change, the exclusion applied only to debt forgiven in calendar years through 2017 and debt discharged in 2018 under a written agreement entered into in 2017.
  • The TCJA reduced the threshold for deducting unreimbursed medical expenses from 10% to 7.5% of AGI for 2017 and 2018. The lower threshold now has been extended through 2020. Qualified medical expenses include payments to physicians, dentists, etc., as well as for certain equipment (including glasses, contacts, and hearing aids), supplies, diagnostic devices, and prescription drugs. Travel expenses related to medical care are also deductible, as well as certain long-term care costs. As with mortgage insurance premiums, you must itemize your personal deductions to take advantage of this tax benefit. Due to the income threshold for deducting medical expenses, you’re more likely to claim this deduction when your unreimbursed, out-of-pocket medical costs are high in relation to your income.


  • The TCJA created a new tax credit for certain employers that provide paid family and medical leave but made it available only for 2018 and 2019. Eligible employers can now claim the credit through 2020 if they have a written policy providing at least two weeks of such leave annually to all qualifying employees, both full-time and part-time (the requisite leave for part-timers is determined on a prorated basis), and meet certain other requirements. The amount of the credit begins at 12.5% of wages paid if the leave payment rate is at least 50% of the normal wage rate. The percentage rises incrementally by 0.25 percentage points as the rate of leave payment exceeds 50%, with a maximum credit of 25% when full wages are paid for the leave. The maximum amount of family and medical leave that may be taken into account with respect to any qualifying employee is 12 weeks per tax year.
  • The Work Opportunity Tax Credit (WOTC) was due to expire at the end of 2019, but has been extended through 2020. This tax credit is available to employers that hire individuals who are members of 10 targeted groups, including certain qualified veterans, ex-felons, and certain individuals receiving state benefits.
  • For small businesses wanting to offer retirement plans, the SECURE Act expands access to multiple employer retirement plans (MEPs). MEPs give smaller, unrelated businesses the opportunity to team up to provide defined contribution plans such as 401ks at a lower cost, with less strict fiduciary duties.
  • The SECURE Act provides tax credits to employers for starting retirement plans and automatically enrolling employees. For those starting plans, the credit is based on the number of participating employees and could be as high as $5,000 in the year the plan is established. For those offering automatic enrollment, a $500 per year tax credit is available for three years for new or existing plans.
  • Beginning 2021, employers are required to allow participation in company 401k plans by part-time employees who’ve worked at least 1,000 hours in one year or three consecutive years of at least 500 hours per year. Simultaneously, these workers can be excluded from plan testing requirements to keep from forcing a plan into non-compliance.
  • Several types of employer-sponsored retirement plans have historically been required to be established at various times during the year while others have been able to be established by the due date of the employer’s income tax return. The SECURE Act increases the number of plans that may be established by the tax return due date.

Individual Retirement Accounts (IRAs)

  • Under previous law, individuals were prohibited from contributing to traditional IRAs after they reached age 70½, regardless of whether they were still working. The SECURE Act eliminates this restriction so that anyone of any age can contribute to an IRA as long as they have earned income. This matches the existing rules for other types of retirement plans.
  • The SECURE Act raises the age at which taxpayers generally must begin to take their Required Minimum Distributions (RMDs) from 70½ to 72. The new rule applies only if you haven’t reached the age of 70½ by the end of 2019.
  • The minimum age for making a Qualified Charitable Distribution (QCD) was not changed and remains 70 ½. As such, it’s now possible to make QCDs one or two years before taking RMDs. Note that the amount of allowable QCDs will now be reduced by the cumulative total of deductible IRA contributions made after 70 ½. One strategy here would be to maximize Roth or non-deductible contributions rather than deductible contributions. QCDs are deemed to be made from pre-tax dollars, so this strategy results in a tax-free increase in the tax basis of your IRAs.
  • On the downside, the SECURE Act eliminates the “stretch” RMD provisions that have permitted beneficiaries of inherited retirement accounts to spread the distributions over their life expectancies. This previously allowed younger beneficiaries to take smaller distributions while growing the accounts and deferring taxes. Now, most non-spouse beneficiaries must take their distributions over a 10-year period after the deceased’s death. This could increase taxes by pushing beneficiary distributions into years when the beneficiary is working and in higher tax brackets. This change also potentially frustrates the use of trusts as IRA beneficiaries and may require changes to estate planning that incorporates such a strategy. Note that this change is not retroactive; it impacts only IRAs inherited from someone who dies in 2020 and on.


  • The SECURE Act created a new exemption from the 10% tax penalty on early withdrawals from retirement accounts. Taxpayers can withdraw up to $5,000 from a retirement plan without penalty within one year of the birth of a child or an adoption becoming final.
  • The above-the-line deduction for higher education expenses reduces a taxpayer’s AGI and is available regardless of whether the taxpayer itemizes (though it generally can’t be taken if certain tax credits for education expenses are claimed). The deduction is limited to $4,000 for individual taxpayers whose AGI doesn’t exceed $65,000 ($130,000 for joint filers) or $2,000 for individuals whose AGI doesn’t exceed $80,000 ($160,000 for joint filers). This deduction had expired at the end of 2017.
  • A lifetime limit of $10,000 can be taken out of a 529 plan to repay student loans without tax or penalty. This amount can be applied to principal and/or interest and is available to the account’s beneficiary and/or sibling(s). The $10,000 limit is applied on a per recipient basis.
  • 529 plans can be used to pay for apprenticeships. Such a program must be in good standing with the US Department of Labor.
  • 529 plan funds continue to be able to fund up to $10,000 annually of Kindergarten – 12th grade expenses as allowed under the TCJA.
  • Dependents with significant investment income can continue to be taxed according to their parent’s tax bracket rather than the less favorable trust tax brackets as originally intended under the TCJA.
  • A minimum age of 21 for those purchasing e-cigarettes and tobacco products goes into effect.

We can help!

Please reach out to us if you have any questions about these new tax law changes. We can help you understand how they apply to your unique financial situation.