The IRS has released the 2021 cost-of-living adjustments (COLAs) for pension plan dollar limitations and other retirement-related provisions.
Key Unchanged Amounts
The 2021 contribution limit remains unchanged at $19,500 for employees who take part in:
- 401(k) plans,
- 403(b) plans,
- most 457 plans, and
- the federal government’s Thrift Savings Plan
The catch-up contribution limit for employees aged 50 and over who participate in these plans also remains unchanged at $6,500.
The limitation for SIMPLE retirement accounts is unchanged at $13,500.
For individual retirement arrangements (IRAs), 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 so remains $1,000.
IRAs and Roth IRAs
The income ranges for determining eligibility to make deductible contributions to traditional IRAs and to contribute to Roth IRAs have increased for 2021.
Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. The deduction phases out if the taxpayer or his or her spouse takes part in a retirement plan at work. The deduction phase out depends on the taxpayer’s filing status and income.
- For single taxpayers covered by a workplace retirement plan, the 2021 phase-out range is $66,000 to $76,000, up from $65,000 to $75,000 for 2020.
- For married couples filing jointly, when the spouse making the contribution takes part in a workplace retirement plan, the 2021 phase-out range is $105,000 to $125,000, up from $104,000 to $124,000 for 2020.
- For an IRA contributor who is not covered by a workplace retirement plan but who is married to someone who is covered, the 2021 phase out range is between $198,000 and $208,000, up from $196,000 and $206,000 for 2020.
- For a married individual who is covered by a workplace plan and is filing a separate return, the phase-out range is not subject to an annual COLA and remains $0 to $10,000.
The 2021 income phase-out ranges for Roth IRA contributions are:
- $125,000 to $140,000 for singles and heads of household (up from $124,000 to $139,000 in 2020),
- $198,000 to $208,000 for married filing jointly (up from $196,000 to $206,000 in 2020), and
- $0 to $10,000 for married filing separately.
The income limit for low- and moderate-income workers to claim the Saver’s Credit under Code Sec. 25B has also increased for 2021:
- $66,000 for married couples filing jointly (up from $65,000 in 2020),
- $49,500 for heads of household (up from $48,750 in 2020), and
- $33,000 for singles and married filing separately (up from $32,500 in 2020).
Join our mailing list to receive the latest monthly tax news and updates from our team.