IRS Releases 2020 Retirement Contribution Limits

The new retirement contribution limits for 2020 were just released by the IRS.

401(k) contribution limits increased from $19,000 to $19,500 (with catch-up contribution limits increased from $6,000 to $6,500.)

SIMPLE retirement account limits increased from $13,000 to $13,500.

IRA contribution limits remain at $6,000.

See below for details about the $2,000 increase in the Roth phase-out range and other phase-out changes.

 

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IR-2019-179, November 6, 2019

WASHINGTON — The Internal Revenue Service today announced that employees in 401(k) plans will be able to contribute up to $19,500 next year.

The IRS announced this and other changes in Notice 2019-59 (PDF), posted today on IRS.gov. This guidance provides cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2020.

Highlights of changes for 2020

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 from $19,000 to $19,500.

The catch-up contribution limit for employees aged 50 and over who participate in these plans is increased from $6,000 to $6,500.

The limitation regarding SIMPLE retirement accounts for 2020 is increased to $13,500, up from $13,000 for 2019.

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs and to claim the Saver’s Credit all increased for 2020.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or his or her spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor his or her spouse is covered by a retirement plan at work, the phase-outs of the deduction do not […]

Why You Should Start Saving Right Now

Business Insider has a great chart that shows how starting your retirement savings at 25 is so much better than at 35. While interest rates for savings accounts and certificates of deposit aren’t great right now, that will eventually change. It’s important to get in the habit of saving now.

See: http://www.businessinsider.com/saving-at-25-vs-saving-at-35-2014-3

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Finding The Best Tax Software For You

Sandra Block at Kiplinger has a good review of the leading tax software products to help you find the best software for your situation. Although, technically most people complete their taxes online and don’t need to download any software. Many even do their returns on tablets or mobile phones. We don’t have our own reviews, but do have links to leading tax preparation solutions if you want to take a look yourselves.

See: http://www.kiplinger.com/article/taxes/T056-C005-S003-best-tax-software-for-you.html

See also: http://www.moneycafe.com/personal-finance/tax-preparation/

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Find Out The Cost Of Your Marriage Penalty Tax

Jim Wang at US News & World Report has an interesting breakdown of what the marriage penalty tax is costing you. For some people there is a “marriage bonus” where taxes are lower because of the different tax rates between single and married filers.

See: http://money.usnews.com/money/blogs/my-money/2014/03/11/how-much-the-marriage-tax-penalty-will-cost-you

See also: TurboTax – Top 10 Tax Deductions You’re Not Taking.

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