How much can you save in 2021 in tax-advantaged accounts? The Internal Revenue Service recently announced the 2021 cost-of-living adjustments to the dollar limitations for qualified retirement plans and other benefits. Many of the key employee contribution limits remain unchanged from the 2020 limits. Here’s a list of some of the most common limits:
Retirement Plan Limits
|2021 Limits||2020 Limits|
|IRA Catch-Up Contributions (age 50 or older)||$1,000||$1,000|
|401(k)/403(b)/457(b) Elective Deferrals||$19,500||$19,500|
|Catch-Up Contribution (plans other than SIMPLE plans; age 50 or older)||$6,500||$6,500|
|SIMPLE Plan Employee Deferrals||$13,500||$13,500|
|SIMPLE Plan Catch-Up Contributions (age 50 or older)||$3,000||$3,000|
|Plan Maximum Annual Contribution- Defined Contribution Plans (Section 415(c))||$58,000||$57,000|
|Maximum Annual Benefit- Defined Benefit Plans (Section 415(b))||$230,000||$230,000|
|Highly Compensated Employee Definition under Section 414(q)||$130,000||$130,000|
|Key Employees Officer Compensation for Top-Heavy Plans||$185,000||$185,000|
Health Savings Accounts Limits
|2021 Limits||2020 Limits|
|HSA Contribution- Annual Contribution Limit|
|Catch-Up Contributions (age 55 or older)||$1,000||$1,000|
|High Deductible Health Plan- Minimum Annual Deductible|
|High Deductible Health Plan- Maximum Out of Pocket Limit|
Deductible IRA Phase-Outs
In 2021, the deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $66,000 and $76,000, up from $65,000 and $75,000 in 2020. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $105,000 to $125,000 for 2021, up from $104,000 to $124,000 in 2020.
For a person who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $198,000 and $208,000 in 2021, up from $196,000 and $206,000 in 2020.
Roth IRA Phase-Outs
In 2021, the AGI phase-out range for taxpayers making contributions to a Roth IRA is $198,000 to $208,000 for married couples filing jointly, up from $196,000 to $206,000 in 2020. For singles and heads of household, the income phase-out range is $125,000 to $140,000, up from $124,000 to $139,000 in 2020.
We’re here to help you sort through all of these limits and determine the best savings plan for you. Please reach out to us if you have questions about any of the limits for 2021.