The promise of a new year often comes with new considerations for your self-directed IRAs, 401(k)s, and Health Savings Accounts. It’s also a time when the IRS may decide to tweak annual contribution limits or income requirements surrounding tax benefits.
It’s not too late to contribute for 2020! Click here to log in to the Client Portal and click “Contributions” on the left side of the screen.
Let’s take a look at some key contribution information for the 2021 tax year.
Increased Contribution Limits
SEP IRA – SEP IRA holders may contribute 25% of their compensation or $58,000 in 2021, whichever is less, whereas the previous 2020 limit was only $57,000. Furthermore, in calculating compensation for the purpose of this limit, up to $290,000 of compensation needs to be considered versus $285,000 in 2020.
Solo 401(k) – Solo 401(k) participants may contribute up to $58,000 in 2021, up from $57,000 in 2020. The $6,500 catch-up contribution for account holders age 50 or older still applies each year.
Health Savings Account (HSA) – HSA holders with single high-deductible health coverage may contribute $3,600 in 2021, an increase from $3,550 in 2020. Those with family coverage may contribute up to $7,200 in 2021 ($7,100 in 2020). $1,000 catch-up contributions for HSA holders age 55 or older still apply for each year.
Traditional and Roth IRA – These contribution limits will remain $6,000 in 2021. The $1,000 catch-up contribution for account holders age 50 or older will remain in effect as well.
SIMPLE IRA – This limit will also stay the same for 2021: 100% of compensation or $13,500 per year. However, as with SEP IRAs, up to $290,000 in compensation may be considered in determining a 2021 SIMPLE IRA contribution limit (as opposed to $285,000 in 2020).
Modified Adjusted Gross Income
The tax deductibility of Traditional IRA contributions and the ability to contribute to a Roth IRA may be affected by your modified adjusted gross income (MAGI) and by how you file your taxes.
Click here for IRS information about how MAGI may affect Traditional IRA contributions.
Click here for IRS information about how MAGI may affect Roth IRA contributions.
Ready to Make a Contribution?
You have until April 15, 2021—the tax filing deadline—to make 2020 contributions. You can even make 2020 and 2021 contributions at the same time! Log in to the Client Portal and click “Contributions” on the left side of the screen to get started.
Don’t hesitate to give us a call at 877-742-1270 or send us a message through the Client Portal if you have questions or concerns.