WASHINGTON
— The Internal Revenue Service announced cost‑of‑living adjustments affecting
dollar limitations for pension plans and other retirement-related items for tax
year 2021 in Notice
2020-79, posted today on IRS.gov.
Highlights
of changes for 2021
The income
ranges for determining eligibility to make deductible contributions to
traditional Individual Retirement Arrangements (IRAs), to contribute to Roth
IRAs and to claim the Saver’s Credit all increased for 2021.
Taxpayers
can deduct contributions to a traditional IRA if they meet certain conditions.
If during the year either the taxpayer or his or her spouse was covered by a
retirement plan at work, the deduction may be reduced, or phased out, until it
is eliminated, depending on filing status and income. (If neither the taxpayer
nor his or her spouse is covered by a retirement plan at work, the phase-outs
of the deduction do not apply.) Here are the phase-out ranges for 2021:
- For
single taxpayers covered by a workplace retirement plan, the phase-out
range is $66,000 to $76,000, up from $65,000 to $75,000.
- For
married couples filing jointly, where the spouse making the IRA
contribution is covered by a workplace retirement plan, the phase-out
range is $105,000 to $125,000, up from $104,000 to $124,000.
- For
an IRA contributor who is not covered by a workplace retirement plan and
is married to someone who is covered, the deduction is phased out if the
couple’s income is between $198,000 and $208,000, up from $196,000 and
$206,000.
- For
a married individual filing a separate return who is covered by a
workplace retirement plan, the phase-out range is not subject to an annual
cost-of-living adjustment and remains $0 to $10,000.The income limit for
the Saver’s Credit (also known as the Retirement Savings Contributions
Credit) for low- and moderate-income workers is $66,000 for married
couples filing jointly, up from $65,000; $49,500 for heads of household,
up from $48,750; and $33,000 for singles and married individuals filing
separately, up from $32,500.
- The
income phase-out range for taxpayers making contributions to a Roth IRA is
$125,000 to $140,000 for singles and heads of household, up from $124,000
to $139,000. For married couples filing jointly, the income phase-out
range is $198,000 to $208,000, up from $196,000 to $206,000. The phase-out
range for a married individual filing a separate return who makes
contributions to a Roth IRA is not subject to an annual cost-of-living
adjustment and remains $0 to $10,000.
Key
employee contribution limits remain unchanged
The limit on
contributions by employees who participate in 401(k), 403(b), most 457 plans,
and the federal government’s Thrift Savings Plan remains unchanged at $19,500.
The catch-up
contribution limit for employees aged 50 and over who participate in these
plans remains unchanged at $6,500.
The
limitation regarding SIMPLE retirement accounts remains unchanged at $13,500.
The limit on
annual contributions to an IRA remains unchanged at $6,000. The additional
catch-up contribution limit for individuals aged 50 and over is not subject to
an annual cost-of-living adjustment and remains $1,000.
Details on these and other retirement-related cost-of-living adjustments for 2021 are in Notice 2020-79, available on IRS.gov.
(Source: IRS Issue Number: IR-2020-244)