On November 6, 2019, the IRS announced in Notice 2019-59 the following cost-of-living adjustments 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 limitation on the annual benefit under a defined benefit plan under § 415(b)(1)(A) is increased from $225,000 to $230,000;
- The limitation for defined contribution plans under § 415(c)(1)(A) is increased in 2020 from $56,000 to $57,000;
- The limitation used in the definition of “highly compensated employee” under § 414(q)(1)(B) is increased from $125,000 to $130,000;
The income phase-out range for taxpayers making contributions 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, the income phase-out range 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 (also known as the 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.
These relevant cost-of-living adjustments are continually updated and presented in our course The Best Individual Income Tax Update Course by Surgent (BITU). Subscribe to our blog Tangible Gains or follow us on Linkedin, Twitter and Facebook to receive timely insights for tax, accounting, and finance professionals.
Nick Spoltore is VP of Tax & Advisory Content for Surgent CPE. Mr. Spoltore is a graduate of the University of Notre Dame and of Delaware Law School. Before joining Surgent, he practiced tax and business law at the firm of Heaney, Kilcoyne in Pennsylvania and also in Delaware.