This month from Colman Knight:
- Taxes: New Limitations and Contribution Limit Changes for 2021
- Limited-time offer: MoneyMoves® Online Game is free!
- November’s Going Green theme: Intentional Joy
is free to register until end of 2020.
Tax Changes for 2021
by Bob Veres
Every year, the U.S. tax system resets its limitations and allowable contributions due to inflation, and the most recent changes—affecting tax year 2021—were recently announced.
Last year, single taxpayers could fully deduct their contributions to traditional IRA accounts if their income was at or below $65,000; now that income limit has moved up to $66,000, at which point the allowable deduction phases out until it disappears completely at the $76,000 income level. For married filing jointly couples, the phase-out range shifted slightly, from $105,000-$125,000, up from $104,000-$124,000 income levels. The limit on annual contributions remains at $6,000, with a $1,000 additional permitted “catch-up” contribution for people age 50 and over.
The limits on contributions that can be made by employees who participate in 401(k), 403(b) and most 457 plans was unchanged at $19,500, and there was no change in the $6,500 catch-up contribution limit for employees age 50 and over. Participants in SIMPLE retirement accounts can still contribute $13,500.
The limitation on the annual benefit under a defined benefit plan remains unchanged at $230,000, and the limitation for defined contribution plans will go up in 2021 from $57,000 to $58,000.
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