The IRS has announced contribution and benefit limits for 2020. Below are some of the highlights of the upcoming limit changes, as well as a summary of the limits that remain unchanged.
Highlights of Changes for 2020
- The Internal Revenue Service (IRS) announced today that employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings plan, can contribute $19,500 in 2020, up from $19,000 for 2019.
- 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.
- 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.) Click here to view the phase-out ranges for 2020.
- 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, up from $64,000; $48,750 for heads of household, up from $48,000; and $32,500 for singles and married individuals filing separately, up from $32,000.
- 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.
If you have any questions about the updated contribution limits for 2020, please contact your advisor or call our office at 509.735.0484.