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  • by PCS
  • 11/19/2020
  • PCSRetirement, Compliance

2021 IRS limits have been announced with few changes

Effective January 1, 2021, the IRS is implementing some retirement contribution and benefits updates. Although there aren’t drastic changes this year, we wanted to share highlights for your benefit.

Please refer to this chart to compare this year and past years’ limits. The retirement limits that have changed from last year include:

  • An IRA contributor who is not covered by a workplace retirement plan, but is married to someone who is, will have the deduction phased out if their combined income is between $193,000 and $203,000.
  • The AGI phase-out range for married couples filing jointly making Roth IRA contributions is now $198,000 to $208,000, and $125,000 to $140,000 for singles and heads of households.
  • The AGI limit for the Saver’s Credit is $66,000 for married couples filing jointly, $49,500 for heads of households, and $33,000 for married couples filing separately and singles.
  • The limitation for defined contribution plans increased to $58,000.
  • The dollar amount for determining the maximum account balance in an employee stock ownership plan subject to a five-year distribution period increased to $1,165,000. The amount that determines the lengthening the five-year distribution period is still $230,000.

The changes regarding compensation and cost-of-living limits include:

  • The annual compensation limit increased to $290,000.
  • The annual compensation limit for eligible government participants increased to $430,000.
  • The compensation amount for simplified employee pensions (SEPs) increased to $650.
  • The limit for defined contribution plans under 415(c)(1)(A) increased to $58,000.
  • The annual compensation limit increased to $290,000.
  • The dollar amount for determining the maximum account balance in an employee stock ownership plan subject to a 5-year distribution period is increased to $1,165,000.
  • The threshold to determine whether a multiemployer plan is systemically important increased to $1,176,000,000.
  • The adjusted gross income limitation for determining the retirement savings contributions credit for all taxpayers increased to $19,750.
  • The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of households who are active participants in a qualified plan and have adjusted gross incomes between $66,000 and $76,000, increased from last year.
  • The adjust gross income limitation for determining the maximum Roth IRA contribution for married taxpayers filing joint return or for taxpayers filing as a widower increased to $196,000 to $198,000.
  • The adjusted gross income phase-out range for taxpayers making contributions to a Roth IRA is $198,000 to $208,000 for married couples filing jointly increased to $206,000.

For a comprehensive list of all limits for 2021, please visit https://www.irs.gov/pub/irs-drop/n-20-79.pdf.