If you want to stash away more money for retirement in 2020, the Internal Revenue Service (IRS) recently announced that the contribution limits for some popular retirement accounts have increased.
Also experiencing a change for 2020 are the IRS tax rate tables and standard deductions.
Let’s take a look at the retirement account changes first.
The maximum contribution for those who participate in a 401(k), 403(b) and most 457 plans has increased from $19,000 to $19,500 in 2020.
The “catch-up” contribution limit for employees aged 50 and over, who participate in these plans, has increased from $6,000 to $6,500. Someone in their 50s, for example, can now contribute up to $26,000 to an employer 401(k) plan in 2020.
The maximum contribution for traditional and Roth Individual Retirement Accounts will remain the same for 2020. The maximum contribution is $6,000 and the “catch-up” contribution for those 50 and over is $1,000.
What has changed slightly for the traditional deductible IRA account is the number of people who are eligible to receive a tax deduction after contributing to one. Here are the new phase-out ranges:
Here are the new standard deductions for the 2020 tax year:
For married couples filing jointly, the standard deduction rises to $24,800, up $400.
For single taxpayers and married individuals filing separately, the standard deduction rises to $12,400, up $200.
For heads of households, the standard deduction increases to $18,650, up $300.
The top tax rate for 2020 remains 37% for individual single taxpayers with incomes greater than $518,400 ($622,050 for married couples filing jointly).
Here are the other marginal tax rates:
We encourage you to speak with your wealth advisor and tax professional to understand how the updates may affect your unique situation.