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Increase in Retirement Plan Contribution Limits for 2020

 

’Tis the season for the U.S. Internal Revenue Service to make its annual inflation adjustments to a variety of tax rates and limits, including higher estate and gift tax limits for 2020.  In the coming year, individuals will be able to gift or exclude from federal estate taxes a total of $11.58 million—up from $11.4 million in 2019.  The annual gift tax exclusion—the amount you can give to heirs each year without reporting a gift—remains at $15,000.  

The IRS also lifted the annual limit that can be contributed to a defined contribution (401(k) or similar) plan from $19,000 to $19,500, and people 50 or older can make catch-up additional contributions of $6,500—up from 2019’s $6,000.  The amount you can contribute to an Individual Retirement Account is unchanged at $6,000, with a $1,000 catchup limit for people 50 and older.

If an employer allows after-tax contributions, or if you’re self-employed, the overall defined contribution plan limit was raised from $56,000 to $57,000.

The IRS also changed the tax brackets for working Americans, raising slightly the thresholds for the 10%, 12%, 22%, 24%, 32%, 35% and 37% rates, and raised the standard deduction to $12,400—$24,800 for married people filing jointly in 2020.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this article will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 12/13/2019 and are subject to change at any time due to the changes in market or economic conditions. This article was written by an outside source.

 

Sources:
IRA Announces Higher Estate and Gift Tax Limits for 2020
2020 Limitations Adjusted as Provided in Section 415(d), etc.
IRS Announces Higher 2020 Retirement Plan Contribution Limits for 401(k)s and More
The 2020 Tax Brackets are Out.  What is Your Rate?
IRS RP-19-44.pdf