Inflation-adjusted income ranges for 2021 and 401 (k) IRA plans
The IRS announced Monday that the income brackets for determining whether taxpayers are eligible to make deductible contributions to traditional individual retirement plans (IRAs), to contribute to Roth IRAs, and to claim the savings credit will all increase for 2021 from 2020 (Notice 2020-79). Most of the other employee pension plan contribution limits will remain the same.
Taxpayers can deduct contributions to a Traditional IRA if they meet certain conditions, including income limitations. If during the year the taxpayer or his or her spouse were covered by an occupational pension plan, the deduction may be reduced, or gradually, above certain levels of adjusted gross income until it is deleted. If neither is covered by an occupational pension scheme, the phasing out of the deduction does not apply. Here are the phase-out ranges for 2021, most of which have increased from 2020:
- Single taxpayers covered by a workplace pension plan are subject to a phase-out range of $ 66,000 to $ 76,000, up from $ 65,000 to $ 75,000.
- Married couples who file jointly, where the IRA contributing spouse is covered by a workplace pension plan, are subject to a phase-out range of $ 105,000 to $ 125,000 from $ 104,000 at $ 124,000.
- For an IRA contributor who is not covered by a workplace retirement plan and who is married to a covered person, the deduction is phased out if the couple’s income is between $ 198,000 and $ 208,000 $, compared to $ 196,000 and $ 206,000.
- For a married person who files a separate return and is covered by a workplace pension plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains at $ 0 to $ 10. $ 000.
- The income limit for the savings credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $ 66,000 for married couples filing jointly, compared to $ 65,000. ; $ 49,500 for heads of household, compared to $ 48,750; and $ 33,000 for singles and married people filing separately, compared to $ 32,500.
- The income phase-out range for taxpayers contributing to a Roth IRA is $ 125,000 to $ 140,000 for singles and heads of households, from $ 124,000 to $ 139,000. For married couples who file jointly, the income phase-out range is $ 198,000 to $ 208,000, compared to $ 196,000 to $ 206,000. The phase-out range for a married person filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains at $ 0 to $ 10,000.
Most other employee contribution limits remain unchanged from 2020 to 2021
The limit on contributions of employees participating in Sec. 401 (k), s. 403 (b), most Sec. 457 plans, and the federal government’s savings plan remains unchanged from 2020 at $ 19,500.
The catch-up contribution limit for employees aged 50 and over also remains unchanged at $ 6,500.
The limit for SIMPLE retirement accounts remains unchanged from 2020 at $ 13,500.
For IRAs, the annual contribution limit remains unchanged from 2020 at $ 6,000. The additional catch-up contribution limit for people aged 50 and over is not subject to an annual cost of living adjustment and remains at $ 1,000.
– Sally P. Schreiber, JD, ([email protected]) is a JofA senior editor.