Contribution limits for 401(k) plans increasing in 2020; IRA limits remain the same

The contribution limits for employees with 401(k), 403(b) and most 457 plans will increase in 2020 from 19,000 to $19,500.

The catch-up contribution limit for employees 50 and older who participate in these plans is increased from $6,000 to $6,500.

The income ranges for determining eligibility to make deductible contributions to traditional IRAs and Roth IRAs also increased for 2020.

However, the limit on annual contributions to an IRA will stay unchanged at $6,000. The additional catch-up contribution limit for individuals ages 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

Taxpayers are able to deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or their spouse was covered by a retirement plan at work, the deduction can 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.) The phase-out ranges for 2020 are:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is $65,000 to $75,000, up from $64,000 to $74,000.
  • For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $104,000 to $124,000, up from $103,000 to $123,000.
  • 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 $196,000 and $206,000, up from $193,000 and $203,000.
  • 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 phase-out range for taxpayers who make contributions to a Roth IRA is $124,000 to $139,000 for singles and heads of household, up from $122,000 to $137,000. For married couples filing jointly, the income phase-out range is $196,000 to $206,000, up from $193,000 to $203,000. 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.

For more, please visit https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19500-for-2020-catch-up-limit-rises-to-6500

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