The IRS released annual inflation adjustments for 2021 for many tax provisions on Monday, including new income tax brackets and an increased standard deduction. It also announced that contribution limits for 401(k)s and IRAs will not increase next year.
For 2021, 401(k) contribution limits, which are based on cost-of-living adjustments, will remain at $19,500 for individuals, plus an additional $6,500 in catch-up contributions for those 50 or older.
The same limit also applies to 403(b) accounts, most 457 plans and the government Thrift Savings Plan. SIMPLE retirement accounts (savings incentive match plan for employees) will also stay at their current savings limit of $13,500.
Limits on individual retirement accounts will also stay at the 2020 level, maxing out at $6,000. Those over 50 can contribute an extra $1,000 to traditional and Roth IRAs in 2021.
Though the contribution limits remain largely unchanged, the income ranges to be eligible to make Roth IRA contributions will increase next year. The income phase-out range for singles and heads of household will be $125,000 to $140,000. For married couples filing jointly, it will be $198,000 to $208,000.
For more 2021 cost-of-living adjustments, see the IRS's bulletin.
Check out: Here are your new 2021 tax brackets