RETIREMENT CONTRIBUTION LIMIT RISES

Retirement contribution limit rises. The Internal Revenue Service announced that employees in 401 (k) plans will be able to contribute up to $19,500 next year. The IRS announced this and other changes in Notice 2019-59, posted on IRS.GOV This guidance provides cost of living adjustments affecting dollar limitations for pension plans and other retirement related items for tax year 2020. The contribution limit for employers who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $19,000 to $19,500. The catch up contribution limit for employees aged 50 and over who participate in these plans is increased from $6,000 to $6,500. The limitation regarding SIMPLE retirement accounts for 2020 is increased to $13,500, up from $13,000 for 2019. The income ranges for determining eligibility to make deductible contributions to traditional individual Retirement Arrangements (IRSs), to contribute to ROTH IRSs and to claim the Saver’s Credit all increased for 2020. Retirement contribution limit rises.

Taxpayers can deduct contributions to a traditional IRA is 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. 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 $193,00 and $203,000 For a married individual filing a separate IRS 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 Retirement contribution limit rises.

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