For employees participating in employer retirement plans including 401(k)s, 403(b)s, most 457 plans and the federal government’s Thrift Savings Plan (TSP), the contribution limit has increased to $19,500.5 The catch-up contribution limit, which is geared towards employees age 50 and older, has increased to $6,500 and the limit for SIMPLE retirement accounts has been raised to $13,500 for the 2020 tax year.6
If taxpayers meet certain conditions, they can deduct contributions to a traditional IRA. For instance, if either the taxpayer or their spouse was covered by an employer’s retirement plan, the deduction may be reduced or phased out. If neither the taxpayer nor their spouse is covered, the phase-out of the deduction does not apply.7 These ranges for 2020 are as follows:
- For single taxpayers covered by a workplace retirement plan, the phase-out range is $65,000 to $75,000.
- For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $104,000 to $124,000.
- For an IRA contributor who is not covered by a workplace retirement plan, but who is married to someone who is covered, the deduction is phased out if the couple's income is between $196,000 and $206,000.7
Heath Care Spending
The dollar limit for employee salary reductions for contributions to a health flexible spending account, or FSA, has increased $50 from 2019 to $2,750. Also in 2020, participants who have self-only coverage in an HSA, or health savings account, must have a plan in which the annual deductible is not less than $2,350 and no more than $3,550. Additionally, for self-only coverage, the maximum out-of-pocket expense amount of $4,750, which is an increase of $100 from 2019.2