In November 2019, the Internal Revenue Service (IRS) announced the cost of living adjustments for 2020 for most retirement savings plans. However, IRA contribution limits will stay the same. If you plan to make the maximum contributions to your retirement plan in 2020, here’s what you need to know:
Taxpayers can deduct contributions into a traditional IRA if they meet certain conditions. The deduction may reduce if during the year either the taxpayer or their spouse were covered by a workplace retirement plan. The deduction may also phase out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor spouse are covered by a workplace retirement plan, the phase-outs don’t apply.) Here are the phase-out income ranges for 2020, up slightly from 2019:
The income phase-out for Roth IRAs is $124,000 to $139,000 for singles and heads of household. For married couples filing jointly, the income phase-out range is $196,000 to $206,000. In addition, 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.
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, $48,750 for heads of household, and $32,500 for singles and married individuals filing separately.
For instance, you’re not able to save the maximum into your retirement accounts, now is a great time to increase your contributions anyway. If you have any questions regarding contribution limits or setting up IRAs, contact our office.
Additional Disclosure: This article is designed to provide general information on the subjects covered. Pursuant to IRS Circular 230, it is not intended to provide specific legal or tax advice. It cannot be used to avoid penalties or to promote, market, or recommend any tax plan or arrangement. You are encouraged to consult your personal tax advisor or attorney.
In conclusion at Watehouse Financial, we truly enjoy helping people make smart financial decisions. In addition, we look forward to learning more about you, your priorities, and your goals. Contact us today to discuss your retirement strategy.