We wanted to talk about some of the changes that the IRS is making going into 2020. This is a good time to look at this near year end to review your benefits, 401(k)’s, how much you’re deferring into plans amongst many other items.
401(k) & 403(b)
The first change we want to discuss is the maximum amount you can contribute into a 401(k) or 403(b). In 2019 it was $19,000 and will move up $500 to $19,500 for 2020. For the catch-up provision, which is additional contributions you can make to those plans if you are over the age of 50, is also going up $500 from $6,000 in 2019 to $6,500 in 2020. If your company participates in a Simple IRA those contribution limits are also going up from $13,000 in 2019 to $13,500 in 2020. The catch-up provisions for this plan is actually staying flat at $3,000 a year. The total amount that can be contributed into a defined contribution plan on your behalf is going up $1000 from $56,000 in 2019 to $57,000 in 2020.
Roth IRA & Traditional IRA
One additional topic we want to address is the income phase-out limitations for Roth IRAs and deductible Traditional IRA contributions. In 2019, for single tax payers, Roth IRA contributions were phased-out if you made in between $122,000 and $137,000 in adjusted gross income. In 2020 that number will be going up from between $124,000 and $139,000. For married filing joint taxpayers, in 2019 Roth contributions phased-out between $193,000 and $203,000 in adjusted gross income. In 2020 it will phase-out between $196,000 and $206,000 in adjusted gross income. For deductible IRA contributions in 2019 single tax payers phased-out between $64,000 and $74,000 in adjusted gross income. In 2020 that number will go up and phase-out between $65,000 and $75,000 in adjusted gross income. Also, for married filing jointly it will go from between $103,000 and $123,000 in 2019 to between $104,000 and $124,000 in 2020. This is the income limit to be able to deduct an IRA contribution. These are some of the changes they will be making from 2019 to 2020. As always, there are always a lot of rules and things that could affect your financial plan. If you have questions please don’t hesitate to call us and we will try our best to answer any of your questions.
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