The New Phone Books are Here: Tax Law Updates for 2021
Every year, the U.S. tax system resets its limits and allowable contributions caused by inflation, and the most recent changes (affecting tax year 2021) were recently announced. These are important numbers to us here at SGH Wealth Management because it sets the framework for our year-end tax planning advice involving:
· Roth Conversions
· Mega Back-Door Roth Strategies
· Required Minimum Distribution Planning
· Qualified Charitable Distributions
· Year-End Tax Loss Harvesting.
Last year, single taxpayers could fully deduct their contributions to traditional IRA accounts if their income was at or below $65,000; now that income limit has moved up to $66,000, at which point the allowable deduction phases out until it disappears completely at the $76,000 income level. For married filing jointly couples, the phase-out range shifted slightly, from $105,000-$125,000, up from $104,000-$124,000 income levels. The limit on annual contributions remains at $6,000, with a $1,000 additional permitted “catch-up” contribution for people age 50 and over.
The limits on contributions that can be made by employees who participate in 401(k), 403(b) and most 457 plans was unchanged at $19,500, and there was no change in the $6,500 catch-up contribution limit for employees age 50 and over. Participants in SIMPLE retirement accounts can still contribute $13,500.
The limits on the annual benefit under a defined benefit plan remains unchanged at $230,000, and the limits for defined contribution plans will go up in 2021 from $57,000 to $58,000.
Everyone here at SGH wishes you a great end of year and holidays. We looking forward to being able to be face-to-face again and saying “good-bye” to 2020! Cheers,