Required Minimum Distributions PDF Print E-mail
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Tuesday, 02 February 2010 00:00

Definition: The minimum amount that you must withdraw from your IRA or 401(k) beginning on April 1 of the year following the year in which you reach the age of 70 1/2.

AARP offers a free calculator on its website.

Required Minimum Distributions (RMDs) generally are minimum amounts that a retirement plan account owner must withdraw annually starting with the year that he or she reaches 70 ½ years of age or, if later, the year in which he or she retires. However, if the retirement plan account is an IRA or the account owner is a 5% owner of the business sponsoring the retirement plan, the RMDs must begin once the account holder is age 70 ½, regardless of whether he or she is retired.

Retirement plan participants and IRA owners are responsible for taking the correct amount of RMDs on time every year from their accounts, and they face stiff penalties for failure to take RMDs.

When a retirement plan account owner or IRA owner dies before RMDs have begun, different RMD rules apply to the beneficiary of the account or IRA. Generally, the entire amount of the owner’s benefit must be distributed to the beneficiary who is an individual either (1) within 5 years of the owner’s death, or (2) over the life of the beneficiary starting no later than one year following the owner’s death. See Publication 590 , Individual Retirement Arrangements (IRAs), for complete details on when beneficiaries must start receiving RMDs.
Last Updated on Friday, 05 February 2010 22:25
 

News Flash

Tax Facts for 2009

The IRS updates several tax-related amounts each year to take into account the cost of living adjustments due to inflation. Here's a quick summary of all the essential tax figures for the year 2009.

Standard Deductions

Single: $5,700
Head of Household: $8,350
Married Filing Joint: $11,400
Married Filing Separately: $5,700
Qualifying Widow/Widower: $11,400
Dependent: $950-$5,700*
Additional Amount if Blind: $1,100 (for married filing joint, married filing separately, or qualifying widow); $1,400 (for single and head of household)
Additional Amount if age 65 or older: $1,100 (for married filing joint, married filing separately, or qualifying widow); $1,400 (for single and head of household).
More information about the standard deduction.
* Dependents must calculate their standard deduction using an IRS Worksheet.

Personal Exemptions

Per taxpayer and dependent: $3,650
More information about personal exemptions.

Phaseout of Personal Exemptions

The amount you can claim for personal exemptions starts to be reduced (or "phased out") once you reach certain income thresholds. If your income is within these ranges, your personal exemptions will be reduced. If your income exceeds the amounts listed below, your personal exemption is $2,433.
Single: $166,800 - $289,300
Head of Household: $208,500 - $331,000
Married Filing Joint: $250,200 - $372,700
Married Filing Separately: $125,100 - $186,350
Qualifying Widow/Widower: $250,200 - $372,700

More information about the personal exemptions.

Filing Requirement Thresholds

You are required to file a tax return if your income exceeds the combined total of your standard deduction and personal exemption. Here's the 2009 filing requirement thresholds:
Single: $9,350 ($10,750 if age 65 and over)
Head of Household: $12,000 ($13,400 if age 65 and over)
Married Filing Joint: $18,700 ($19,800 if one spouse age 65 and over; $20,900 if both spouses age 65 and over)
Married Filing Separately: $3,650 (any age)
Qualifying Widow/Widower: $18,700 ($19,800 if age 65 and older)

Retirement Plan Limits

You can save for retirement up to the maximum dollar limit. Maximum contributions vary by the type of retirement plan:
Traditional or Roth IRA: $5,000 ($6,000 if age 50 or older)
SEP IRA: $49,000
SIMPLE IRA: $11,500 ($14,000 if age 50 or older)
401(k) plan: $16,500 ($22,000 if age 50 or older)
403(b) plan: $16,500 ($22,000 if age 50 or older)
457 plan: $16,500 ($22,000 if age 50 or older)
Defined Contribution Pension: $49,000
Defined Benefit Pension: $195,000
More information about retirement planning.
*If you fund both a traditional and Roth IRA, your total contribution to cannot exceed $5,000 combined (or $6,000 if age 50 or older).
**SEP IRA contributions are calculated on an IRS worksheet. Your maximum contribution may be less than $49,000.

Standard Mileage Rate for 2009

You can deduct the cost of driving a vehicle for business-use, for traveling to a doctor, when relocating for a new job, or when you are engaged in charitable activities. The 2009 standard rates for mileage are:

  • 50 1/2 cents per mile for business (Jan 1 - June 30),
  • 58 1/2 cents per mile for business (July 1 - Dec 31), and
  • 19 cents per mile for business (Jan 1 - June 30), and
  • 27 cents per mile for business (July 1 - Dec 31), and
  • 14 cents per mile for charitable service.

More information about deducting car and truck expenses.

Sources: Internal Revenue Service, Revenue Procedure 2008-66 (pdf), IR-2008-117, IR-2008-118, and IR-2008-131.

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