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There are cost of living adjustments that may affect a taxpayer’s pension plan and other retirement-related savings next year. People should familiarize themselves with these adjustments, so they aren’t caught off guard.

Here are some highlights of the 2021 changes:

The income ranges for these actions all increased for 2021:

Determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements.
• Contributing to Roth IRAs.
• Claiming the saver’s credit.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced or phased out. This reduction goes until the deduction is eliminated. The amount of the deduction depends on the taxpayer’s filing status and their income. If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-outs don’t apply.

Here are the traditional IRA phase-out ranges for 2021:

Written by IRS | Posted in TaxConnections

The Internal Revenue Service announced cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2021 in Notice 2020-79 PDF, posted today on IRS.gov.

Highlights Of Changes For 2021

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs and to claim the Saver’s Credit all increased for 2021.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or his or her spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor his or her spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase-out ranges for 2021: