Ready for These 10 Important 2021 Tax Changes?

2. Employer-Sponsored Retirement Contribution Limits Increase

In terms of contribution limits, these have no chance from 2021 for elective deferrals to 401(k), most 457 plans, 403(b), and the federal government’s Thrift Savings Plan, staying at $19,500.

You and your employer can contribute up to $58,000 to a plan, compared to last year’s $57,000.

Sorry, seniors over the age of 50, the number of catch-up contributions you can save up remains the same, $6,500.

3. Traditional IRA Income Restrictions to Deduct Contributions Rise

In terms of IRAs, contribution limits remain the same, meaning you can contribute $6,000 if you are under the age of 50 and $7,000 if you’re older.

But there are other changes that are coming to Traditional IRAs in 2021. Those who are also covered by an employer-sponsored plan should know the know income limits when you’ll still get a deduction for contribution increases.

For those who are married and filing jointly, the maximum deduction is reduced at $104,000, compared to 2020s $103,000. It is also completely eliminated at $124,000 ($123,000 in 2020).

For single filers, the maximum deduction is reduced too in 2021, at $65,000 compared to $64,000 in 2020. Furthermore, this is eliminated at $124,000, but it used to be eliminated at $123,000 in 2020.

Changes are coming even if your spouse is covered but you are not. In this case, your maximum deduction is reduced to $198,000 (from $196,000) and is eliminated completely at $208,000, whereas it used to be $206,000 in 2020.