The IRS released annual inflation adjustments for 2021 for many tax provisions on Monday, including new income tax brackets and an increased standard deduction. It also announced that contribution limits for 401(k)s and IRAs will not increase next year.
The following limits are going up for 2021:
- The annual additions limit for defined contribution plans increases to $58,000
- The annual compensation limit increases to $290,000
- The Social Security Wage Base increases to $142,800
The following limits will remain the same next year:
- The salary deferral limit for 401(k), 403(b) and 457 plans remains at $19,500
- The SIMPLE deferral limit remains at $13,500
- The catch-up contribution limits for 401(k) plans and SIMPLE IRAs remain the same $6,500 and $3,000 respectively
- The annual additions limit for defined benefit plans remains at $230,000
- The compensation limit for determining who is a highly compensated employee will remain the same at $130,000
For more 2021 cost-of-living adjustments and 401(k) limits, visit the IRS’s bulletin. If you have any questions, please reach out to us at firstname.lastname@example.org or check out our other blogs for more information on 401(k)’s.