The Millstone Times January 2021

FAMILY MATTERS

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New income ranges for IRA eligibility in 2021 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: • $66,000 to $76,000 – Single taxpayers covered by a workplace retirement plan. • $105,000 to $125,000 – Married couples filing jointly. This applies when the spouse making the IRA contribution is covered by a workplace retirement plan.

• $198,000 to $208,000 – A taxpayer not covered by a workplace retirement plan married to someone who’s covered. • $0 to $10,000 – Married filing a separate return. This applies to taxpayers covered by a workplace retirement plan. Here are the income phase-out ranges for taxpayers making contributions to a Roth IRA: • $125,000 to $140,000 – Single taxpayers and heads of household. • $198,000 to $208,000 – Married, filing jointly. • $0 to $10,000 – Married, filing separately. Here are the income limits for the saver's credit, also called the retirement savings contributions credit: • $66,000 – Married, filing jointly. • $49,500 – Head of household. • $33,000 – Singles and married individuals filing separately.

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