Birthdays can be important milestones for legal, financial, and tax purposes. For tax purposes, some rules apply on the date of a birthday, some apply as of the close of the taxable year, and some apply with respect to a half-year birthday.

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Younger Years

The early years of a child for many families are focused on support and education. In the blink of an eye, however, a child becomes an adult in the eyes of the law.

Age 13.

A parent who works can claim a dependent care credit for a child who has not attained age 13 [Internal Revenue Code (IRC) section 21(b)(1)(A)]. This means that expenses up to this birthday can be taken into account for the year in which this birthday occurs. This age limit, however, does not apply if the child is a dependent who is physically or mentally incapable of self-care [IRC section 21(b)(1)(B)].

Age 17.

A tax credit of up to $1,000 can be claimed for a qualifying child who is under the age of 17 [IRC section 24(c)(1)]. If the child attains 17 during the year, no credit is allowed for that year; there is no proration of the credit. Furthermore, there is no age exception for a disabled child (Polsky, CA-3, USTC paragraph 50,506).

Age 18.

From a legal perspective, the most important milestone is becoming an adult in the eyes of the law. This dividing line influences the ability to sign contracts, marry without parental permission, vote, and more. It is the age of majority, or emancipation, in most states, which means the person assumes all the legal rights and responsibilities of an adult. (The age of majority is 19 in Alabama and Nebraska and 21 in Colorado and Mississippi, although emancipation can take place earlier younger; marriage or military service, and some rights, such as voting, are fixed at age 18.)

Even when a child reaches the age of majority, some marital dissolution agreements require child support to continue to age 21 or until the child completes college.

Men (not women) age 18 to 25 must register with the Selective Service System unless an exception applies (see While there is no military draft currently in place, registration is still mandatory. There are consequences for nonregistration, including a bar to obtaining federal jobs and job training, and possible criminal penalties.

One education savings plan—Coverdell Education Savings Accounts—permits contributions only up to a set age. Anyone with income below set limits can contribute up to $2,000 annually to a Coverdell Education Savings Account (ESA) for a beneficiary who has not yet attained age 18 [IRC section 530(b)(1)(A)(ii)]; contributions can be made until the birthday. For example, if a child turns 18 on May 1, 2017, a contribution of up to $2,000 can be made for 2017 until April 30, 2017. The contribution limit is not prorated for the portion of the year in which the child is under age 18.

Ages 19 and 24.

These birthdays are the key dates for determining whether a child qualifies for the dependency exemption [IRC section 152(c)(1)(C)]. A child can qualify as long as he is younger than the taxpayer claiming the exemption and is under age 19. Furthermore, the child can continue to qualify up to the age of 24 if he is a full-time student and younger than the taxpayer.

If a child is older than 19 or 24, a parent may still claim a dependency exemption [IRC section 152(d)] as long as the child can be treated as a qualifying relative (e.g., a parent supporting a child who is 29 years old and is living in the parent’s home). A dependency exemption can be claimed if the child’s gross income is not more than a set amount ($4,050 in 2017) and other requirements are met. Ages 19 and 24 are also the ages at which the “kiddie tax” ends [IRC section 1(g)].

Young Adulthood and Middle Age

Typically, completion of an education and entering the job market marks the start of savings programs. These are designed to attain such goals as buying a home and providing a financially secure retirement. These years might bring other concerns that eclipse savings goals.

Age 26.

Under the Affordable Care Act, a child can remain on her parent’s insurance policy until reaching age 26, whether the child is a dependent or even lives with the parent. Once the child attains age 26, however, the child must obtain her own coverage.

Age 30.

When a beneficiary in a Coverdell ESA attains age 30, the balance in the account must be distributed to him within 30 days of this birthday [IRC section 530(b)(1)(E)]. Even if there is no actual distribution of the funds, the distribution is deemed to occur on this date; earnings in the account become taxable at this time.

The deemed distribution rule does not apply if—

  • the beneficiary has special needs, or
  • the beneficiary of the account is changed to a “member of the family” [(as defined in IRC section 529(e)(2)], such as the beneficiary’s child or sibling.

Age 50.

This is the birthday at which certain age-related discounts begin to apply. These may include reduced ticket prices for parks, museums, and other entertainment facilities; meal discounts; and transportation and lodging discounts. Membership in the American Association of Retired Persons, which comes with eligibility for various discounts, begins at this age.

Additional retirement savings through certain qualified retirement plans and IRAs is permissible starting at age 50 for individuals with compensation from a job or self-employment. These “catch-up” contributions enable workers to maximize retirement savings. Despite the term “catch-up” for those age 50 and older, there is no relationship to prior contributions or the absence of such contributions.

For 2017, the additional catch-up amounts (Notice 2016-62) are —

  • for 401(k), 403(b), and 457 plans: $6,000;
  • for SIMPLE IRAs: $3,000; and
  • for IRAs and Roth IRAs: $1,000

Age 55.

Because savings in qualified retirement plans and IRAs is meant for retirement income, early distributions can be penalized. The 10% early distribution penalty on distributions from qualified retirement plans prior to age 59½ does not apply, however, if distributions are made because of separation from service after age 55 (IRC section 72(t)(2)(A)(v)). This exception does not apply to distributions from IRAs at age 55.

As in the case of retirement plans and IRAs, additional contributions based on age can be made to health savings accounts (HSA) beginning at age 55. The additional contribution is $1,000. This amount is fixed by law; it is not indexed for inflation.

Age 59½.

A half birthday matters in tax law. The 10% early distribution penalty on distributions from qualified retirement plans and IRAs does not apply after attaining age 59½ [IRC section 72(t)(2)(A)(i)], regardless of what the person does with the distribution.

Later Years

As individuals enter their 60s, thoughts begin to turn to retirement.

Age 62.

This is the age at which a person eligible for Social Security benefits can begin receiving them. Commencing benefits prior to the full retirement age, however, means a permanent reduction in benefits ( For example, a person born in 1954 who attained age 62 in 2016 and began collecting benefits then has a permanent reduction of 25%; a $1,000 benefit that could have been claimed at age 66 (this person’s full retirement age) becomes $750.

Social Security benefits can begin as early as age 60 for widows and widowers claiming benefits under their spouses’ earnings records (; however, this still results in a permanent reduction in benefits.

Age 65.

This is the age at which Medicare coverage begins, regardless of whether the person is still working or collecting Social Security benefits. An individual with employer health coverage may not need to sign up for Medicare at this time, depending on whether the employer coverage or Medicare is the primary or secondary payor. If the employer has 20 or more employees, its plan is the first payor, so Parts B and D of Medicare may not be needed ( Because there is no cost to an eligible person for Part A, there is no reason not to enroll for this coverage in either case.

Age 65 has important tax consequences to compliment Medicare eligibility. An individual who attains age 65 before the close of the taxable year and uses the standard deduction can claim an additional amount for age [IRC section 63(f)]; for 2017, the additional standard deduction amount is $1,550 for singles and $1,250 for each spouse age 65 and older for joint filers. This also applies to anyone with a Jan. 1 birthday who is deemed to have reached age 65 in the previous year. For instance, an individual who attains age 65 on Jan. 1, 2018 can claim the additional standard deduction on a 2017 income tax return.

Being 65 years old also affects the threshold for filing an income tax return [IRC section 6012(a)(1)(B)]. More specifically, the gross income threshold is increased by the additional standard deduction amount, which raises the amount of income required to file a federal tax return.

There is a 20% penalty on nonqualified distributions from a health savings account (HSA) before age 65. Once an individual attains this age, there is no penalty on such distributions; however, withdrawals for nonqualified expenses are still taxable.

Age 66.

This is the Social Security full retirement age for those born between 1943 and 1954 ( The full retirement age increases by two months for each year after 1954, reaching 67 for those born in 1960 or later.

Age 70.

This is the age at which maximum Social Security benefits can begin. By delaying benefits past the full retirement age, a person’s benefits are increased by 8% per year for those born in 1943 and later ( The IRS offers an online calculator for the impact of the delayed retirement credit (; for example, if a person with a full retirement of 66 delays benefits until age 70, the benefits will be increased by 32%.

Age 70½.

Attaining this age bars any further contributions to an IRA [IRC section 219(d)(1)]; no contribution is allowed if this age is attained by the end of the year. This contribution limit applies even if the individual continues to work; however, contributions to a SEP and a SIMPLE IRA, which are IRA–based retirement plans, can continue past this age.

Attaining this age also triggers the required minimum distribution (RMD) rules for qualified retirement plans and IRAs; owners of these accounts must begin their RMDs by the end of the year in which this age is reached. For example, if Sandra’s 70th birthday is March 1, 2017, she reaches age 70½ in 2017, so her first RMD is due by Dec. 31, 2017. Miriam, whose birthday is July 1, does not attain age 70½ until 2018, and her first RMD is due by Dec. 31, 2018.

The failure to take an RMD can trigger a 50% penalty [IRC section 4974(a)]; however, the RMD can be delayed in some circumstances:

  • The first RMD is treated as timely if taken by April 1 following the year in which the taxpayer attains age 70½. In the earlier example, Sandra would not have a penalty if her first RMD were taken by April 1, 2018. In any event, the second RMD is due by Dec. 31, 2018.
  • An individual who is still working for a company with a qualified plan may postpone RMDs until actual retirement if the plan permits it; however, this delay does not apply to anyone who is a more-than-5% owner of the company, or to IRAs and IRA-based plans (e.g., SEPs, SIMPLE IRAs, SARSEPs).

There are no lifetime RMDs for the owner of a Roth IRA.

Age 85.

This is the age that some commercial annuities set for starting to receive payouts from deferred annuities. Insurance companies are free to set their own starting date; some may be as old as age 100.

Many planners send birthday cards to clients, and this can be an occasion to explain to these individuals how their annual milestones influence their legal, financial, and tax planning actions.


  • _____ What are the birthdays of each child/grandchild?
  • _____ Do I have a health savings account?
  • _____ Have I determined whether to sign up for Medicare Parts B and D at age 65 if I also have employer coverage?
  • _____ Have I viewed my earnings statement from Social Security and checked projected benefits?
  • _____ Am I eligible for a pension from my current or former employer, and at what age does the pension begin?
  • _____ Do I have an IRA or multiple IRAs?
  • _____ Do I have a 401(k) or similar account?
  • _____ Do I own a deferred annuity (nonqualified)?
  • _____ Do I plan to take early retirement?
  • _____ Will I continue to work past the full retirement age for Social Security purposes?
Sidney Kess, JD, LLM, CPA is of counsel to Kostelanetz & Fink and a senior consultant to Citrin Cooperman & Co., LLP. He is a member of the NYSSCPA Hall of Fame and was awarded the Society’s Outstanding CPA in Education Award in May 2015. He is also a member of The CPA Journal Editorial Board.
James R. Grimaldi, CPA is a partner at Citrin Cooperman.
James A.J. Revels, CPA is a partner at Citrin Cooperman.