San Francisco Tax Preparation / CPA: 2020 Inflation Adjustments for Pension Plans, Retirement Accounts

Filed in CCH NEWS FEED by on January 30, 2020

The IRS has released the 2020 cost-of-living adjustments (COLAs) for pension plan dollar limitations, and other retirement-related provisions.

Highlights of 2020 Changes

The contribution limit for employees who take part in 401(k) plans, 403(b) plans, most 457 plans, and the federal government’s Thrift Savings Plan, has increased to $19,500. Employees age 50 and over who participate in these plans can make a “catch-up” contribution for 2020 of up to $6,500.

SIMPLE Plans. For Savings Incentive Match Plan for Employees (SIMPLE) retirement accounts, the maximum elective contribution for 2020 has increased to $13,500.

Saver’s Credit. The income limit for the retirement savings contributions credit for low- and moderate-income workers is:

  • $65,000 for married individuals filing jointly,
  • $48,750 for heads of household, and
  • $32,500 for singles and married individuals filing separately.

2020 IRA Changes

Individuals can deduct contributions to a traditional individual retirement arrangement (IRA) if they meet certain conditions. The deduction can be reduced or phased out if the taxpayer or his or her their spouse takes part in a retirement plan at work, based on filing status and adjusted gross income (AGI). There is no phase-out if neither the taxpayer nor the spouse is covered by a workplace retirement plan. The AGI phase-out ranges for deductible IRA contributions for 2020 are:

  • $65,000 to $75,000 for a single individual covered by a workplace retirement plan;
  • $104,000 to $124,000 for a married couple filing jointly where the spouse making the IRA contribution takes part in a workplace plan;
  • $196,000 to $206,000 for an IRA contributor who is not covered by a workplace plan but is married to an individual who is covered; and
  • $0 to $10,000 for a married individual filing separately who is covered by a workplace plan (this range is not subject to an annual COLA adjustment).

Roth IRAs. The income ranges also have increased for determining eligibility to contribute to a Roth IRA. The 2020 AGI phase-out ranges are:

  • $196,000 to $206,000 for married filing jointly,
  • $124,000 to $139,000 for singles and heads of household, and
  • $0 to $10,000 for married filing separately (this range is not subject to an annual COLA adjustment).

IRA Contribution Limits. The annual limit on contributions to an IRA remains unchanged at $6,000. For individuals age 50 and over, the IRA “catch-up” contribution limit remains $1,000 (this limit is not subject to an annual COLA adjustment).

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