The 2020 contribution and benefit limits have been released by the IRS. The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is increased.
The following limits are applicable to 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan:
• The contribution limit will be $19,500, up from $19,000 for 2019
• The catch-up provision limit for employees aged 50 and over will be $6,500, up from $6,000 for 2019
• For SIMPLE Retirement accounts, the contribution limit will be $13,500, up from $13,000 for 2019
2020 Contribution Limits for IRAs
Based on the estimated cost of living calculations for 2020, the IRS has determined they cannot support an increase in the contribution limit for 2020. The limit will remain at $6,000. Additionally, the IRA reminds everyone that the IRA catch-up provision limit for employees aged 50 and over is not subject to an annual cost-of-living adjustment. Therefore, the contribution limit will remain at $1,000.
Other 2020 Contribution and Income Limits Issued By the IRS
In addition to the aforementioned changes reported by the IRS for next year, there were a number of other IRS limits announced. The income limit for the Saver's Credit will be set as follows:
• $65,000 for married couples filing joint returns, up from $64,000
• $48,750 for for taxpayers filing as for heads of household, up from $48,000
• $32,500 for singles and married individuals planning to file separately, up from $32,000
Defined Benefit plan income limits have been set at:
• Under § 415(b)(1)(A), the annual benefit is set at $230,000, up From $225,000
• Under § 415(c)(1)(A), the annual benefit is set at $57,000, up from $56,000
• Under §§ 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii), the annual compensation limit is set at $285,000, up from $280,000
• Under § 416(i)(1)(A)(i), the dollar limitation is set at $185,000, up from $180,000
• Under §§ § 414(q)(1)(B), the highly compensated income limitation is set at $130,000, up from $125,000
While your tax accountant and investment planners should be aware of these changes, it's still your responsibility to know and understand these number as they pertain to your personal finances. The above information is a vital part of your tax planning efforts for the new year. Should you have any additional questions or concerns, you can contact us to get placed with one of our financial planners or the IRS directly.
Source; https://www.plansponsor.com/irs-announces-2020-contribution-benefit-limits/
