Teipen Logo

New 2021 IRA eligibility changes and what they will mean for you

Posted on December 18, 2020

Teipen CPA Group has learned of 2021 IRS cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items.

Here are the announced 2021 changes:

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), Roth IRAs, and the Saver’s Credit all increased for 2021.

Taxpayers can still deduct contributions to a traditional IRA if they meet certain conditions, including if during the year either the taxpayer or his/her spouse was covered by a work retirement plan; however the deduction may be reduced or phased out until it is eliminated, depending on filing status and income. Here are the phase-out ranges for 2021:

  • Single taxpayers covered by a workplace retirement plans — Phase-out range is $66,000 to $76,000 (up from $65,000 to $75,000).
  • Married couples filing jointly where the spouse making the IRA contribution is covered by a workplace retirement plan — Phase-out range is $105,000 to $125,000 (up from $104,000 to $124,000).
  • IRA contributors not covered by a workplace retirement plan and married to someone who is covered — The deduction is phased out if the couple’s income is between $198,000 and $208,000 (up from $196,000 and $206,000).
  • Married individuals filing separate returns and not covered by a workplace retirement plan — Phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
  • The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $66,000 for married couples filing jointly (up from $65,000); $49,500 for heads of household (up from $48,750) and $33,000 for singles and married individuals filing separately (up from $32,500).
  • The income phase-out range for taxpayers making contributions to a Roth IRA is $125,000 to $140,000 for singles and heads of household (up from $124,000 to $139,000). For married couples filing jointly, the income phase-out range is $198,000 to $208,000 (up from $196,000 to $206,000). Married individuals filing a separate return that make contributions to a Roth IRA is not subject to an annual cost-of-living adjustment (and remains $0 to $10,000).

2021 Key employee contribution limits that remain unchanged

  • Contributions by employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $19,500.
  • Catch-up contribution limits for employees aged 50 and over who participate in these plans remains unchanged at $6,500.
  • SIMPLE retirement account contribution limits remain unchanged at $13,500.
  • Limits on annual contributions to an IRA remains unchanged at $6,000. (The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000).

Got a question on a detail – or how these adjustments may impact your bottom line? We can help you put it all in perspective. Just give us a call.