In guidance released Wednesday, the Internal Revenue Service said employees in 401(k) plans will be able to contribute as much as $19,500 in 2020. Participants in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan will see that contribution limit increased from $19,000 in 2019.

The guidance introduced several other changes as well: The catch-up contribution limit for employees 50 and older who participate in these plans will increase to $6,500, from $6,000. The limitation on SIMPLE retirement account contributions will increase from $13,000 for 2019 to $13,500 for 2020. In addition, income ranges used to determine eligibility for making deductible contributions to traditional IRAs, contributing to Roth IRAs, and claiming the Saver's Credit will all increase for 2020.

According to the guidance, taxpayers can deduct contributions to a traditional IRA by meeting certain conditions. If the taxpayer—or his or her spouse—was covered by a retirement plan at work during the year, 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, was covered by a retirement plan at work, the phase-outs of the deduction do not apply.

These are the phase-out ranges for 2020:

  • Single taxpayers covered by a workplace retirement plan: $65,000 to $75,000, up from $64,000 to $74,000
  • Married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan: $104,000 to $124,000, up from $103,000 to $123,000
  • IRA contributor 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 $196,000 and $206,000, up from $193,000 and $203,000
  • 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.

The income phase-out range for taxpayers contributing to a Roth IRA is $124,000 to $139,000 for singles and heads of household, up from $122,000 to $137,000. For married couples filing jointly, it is $196,000 to $206,000, up from $193,000 to $203,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income limit for the Saver's Credit—a.k.a., Retirement Savings Contributions Credit—for low- and moderate-income workers is $65,000 for married couples filing jointly, up from $64,000; $48,750 for heads of household, up from $48,000; and $32,500 for singles and married individuals filing separately, up from $32,000.

The limit 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.

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Michael S. Fischer

Michael S. Fischer is a longtime contributing writer for ThinkAdvisor. He previously reported on trade and intellectual property topics for the Economist Intelligence Unit and covered the hedge fund industry for MARHedge and Reuters News Service.

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