Tax Milestones by Age: What You Need to Know
- Steve Julal
- Aug 11
- 2 min read
Age can impact tax regulations, as specific birthdays are associated with various IRS rules. Understanding these milestones enables individuals to plan accordingly, minimize penalties, and utilize available benefits. Here’s a guide to key ages and their tax implications for you and your loved ones.
Ages 0–23: The Kiddie Tax
The “kiddie tax” affects children, grandchildren, or other young relatives under 24. In 2025, if a child’s unearned income exceeds $2,700, the excess is taxed at the parent’s higher federal rate.
Age 30: Coverdell Education Savings Accounts
A Coverdell Education Savings Account (CESA) must be distributed within 30 days after the beneficiary turns 30. Earnings not used for qualified education expenses are taxable with a 10% penalty. To avoid this, transfer the balance to a younger beneficiary’s CESA.
Age 50: Retirement Catch-Up Contributions
Once you turn 50, you can boost retirement savings through “catch-up” contributions:
401(k), 403(b), 457 plans: Add up to $7,500 extra, for a 2025 total of $31,000.
SIMPLE IRA: Add up to $3,500 extra (or $3,850 if your employer has 25 or fewer employees), for a total of $20,000.
Traditional or Roth IRA: Add up to $1,000 extra, for a total of $8,000.
Age 55: Penalty-Free Withdrawals from Employer Plans
Individuals who leave their employment at age 55 or older can take distributions from their former employer’s 401(k) or 403(b) plans without incurring the 10% early withdrawal penalty. This provision does not apply to IRAs.
Age 59½: Penalty-Free Withdrawals from All Retirement Accounts
At age 59½, you can withdraw from IRAs and 401(k)s penalty-free, but withdrawals may still be taxed.
Ages 60–63: Larger Catch-Up Contributions
If you’re between 60 and 63 in 2025, you can make even larger catch-up contributions:
401(k), 403(b), 457 plans: Up to $11,250 extra
SIMPLE IRA: Up to $5,250 extra
Age 73: Required Minimum Distributions (RMDs)
At age 73, individuals are typically required to take annual Required Minimum Distributions (RMDs) from tax-deferred accounts such as traditional IRAs, SEP IRAs, and 401(k)s. Failure to withdraw the necessary amount may result in a penalty of up to 25% of the shortfall.
Individuals who are still employed and own 5% or less of their employer's company can defer RMDs from that specific plan until they retire.
Bottom Line
Age-based tax rules can impact your finances. Tracking these milestones helps you maximize benefits and avoid mistakes. Contact us for tailored advice.
