2020 Tax Retirement Guidelines

2020 Tax Preparation Retirement Credits

For 2020, the elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is $19,500 ($19,000 in 2019). For persons age 50 or older in 2020, the limit is $26,000 ($6,500 catch-up contribution).

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.

Retirement Savings Contributions Credit (Saver’s Credit)
In 2020, the adjusted gross income limit for the saver’s credit for low and moderate-income workers is $65,000 for married couples filing jointly, $48,750 for heads of household, and $32,500 for married individuals filing separately and for singles. The maximum credit amount is $2,000 ($4,000 if married filing jointly).

As a reminder, starting in 2018, the Saver’s Credit can be taken for your contributions to an ABLE (Achieving a Better Life Experience) account if you’re the designated beneficiary. However, keep in mind that your eligible contributions may be reduced by any recent distributions you received from your ABLE account.

Other Retirement Plans

Effective January 1, 2020, the limitation on the annual benefit under a defined benefit (DB) plan under § 415(b)(1)(A) is increased from $225,000 to $230,000.

The limitation for defined contribution (DC) plans under § 415(c)(1)(A) is increased in 2020 from $56,000 to  $57,000.

The annual compensation limit under §§ 401(a)(17), 404(l), 408(k)(3)(C), and408(k)(6)(D)(ii) is increased from $280,000 to $285,000.

The dollar limitation under § 416(i)(1)(A)(i) concerning the definition of “key employee” in a top-heavy plan is increased from $180,000 to $185,000.

The limitation used in the definition of “highly compensated employee” under§ 414(q)(1)(B) is increased from $125,000 to $130,000.

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