The Internal Revenue Service announced that employees in 401(k), 403(b), most 457 and the federal government’s Thrift Saving plans will be able to contribute up to $19,500 in 2020.
Other retirement plan contribution changes for 2020 include:
The catch-up contribution limit for employees aged 50 and over who participate in these plans is increased to $6,500.
The limitation regarding SIMPLE retirement accounts is increased to $13,500.
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.
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 2020:
The income phase-out range for taxpayers making contributions to a Roth IRA is $124,000 to $139,000 for singles and heads of household. For married couples filing jointly, the income phase-out range is $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.
The income limit for the Saver's Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $65,000 for married couples filing jointly, $48,750 for heads of household and $32,500 for singles and married individuals filing separately.
Key retirement plan contribution limits that remain unchanged:
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.