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IRA and 401(k) contribution limits for 2021

November 17, 2020

By Alliant Credit Union

The IRS has just announced the 2021 cost-of-living adjustments made to contribution limits and income thresholds for retirement plans. Only a few of the retirement-related IRS contribution and income amounts are changing for 2021. Most amounts remain the same from 2020. 

401(k)

  • 2021 contribution limits for employee 401(k) plans will remain at $19,500.
  • 2021 catch-up contribution limits for 401(k) participants aged 50 and older remain at $6,500.

Traditional IRAs (individual retirement account)

  • The annual contribution cap for individual retirement accounts (IRA) is unchanged from 2019 and 2020 at $6,000 per eligible individual.
  • Catch-up contributions for those 50 and over remain capped at an additional $1,000 ($7,000 total contribution).
  • 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 $1,000 from the 2020 phase-out range.
  • 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 increases by $1,000 to a range of $105,000 to $125,000. 
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction phase-out range was increased to between $198,000 and $208,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

Roth IRAs

  • For married couples filing jointly, the income phase-out range for taxpayers contributing to a Roth IRA is an AGI of $198,000 to $208,000, an increase of $2,000 from 2020.
  • For singles and heads of household, the Roth IRA income phase-out range is increased by $2,000 to an AGI of $125,000 to $140,000 (a $1,000 increase).
  • For a married individual filing a separate return, the Roth IRA phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000

 Summary of 2021 contribution limits and income thresholds vs 2020

      2020 2021
Individual Retirement Accounts (IRAs)                                                       
IRA Contribution Limit $6,000 $6,000
IRA Catch-Up Contributions 1,000 1,000
 
IRA AGI Deduction Phase-out Starting at 
   
Joint Return $104,000 $105,000
Single or Head of Household 65,000 66,000
 
SEP
 

 
 
SEP Minimum Compensation $600 $650
SEP Maximum Contribution 57,000 58,000
SEP Maximum Compensation 285,000 290,000
 
SIMPLE Plans 
   
SIMPLE Maximum Contributions $13,500 $13,500
Catch-up Contributions 3,000 3,000
 
401(k), 403(b), Profit-Sharing Plans, etc.     
 
 
 
 
Annual Compensation $285,000 $290,000
Elective Deferrals 19,500 19,500
Catch-up Contributions 6,500 6,500
Defined Contribution Limits 57,000 58,000
ESOP Limits 1,150,000 1,165,000
 
Other
 
 
 
 
HCE Threshold $130,000 $130,000
Defined Benefit Limits 230,000 230,000
Key Employee 185,000 185,000
457 Elective Deferrals 19,500 19,500
Control Employee (board member or officer) 115,000 115,000
Control Employee (compensation-based) 230,000 235,000
Social Security Taxable Wage Limit 137,700 142,800

 

While the information provided is based on our understanding of current tax laws, and has been gathered from sources believed to be reliable, it cannot be guaranteed. Federal tax laws are complex and subject to change. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.


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