In a sure sign that the end of the year is just around the corner, the Internal Revenue Service has announced cost‑of‑living adjustments for the dollar limitations for pension plans and other retirement-related items for tax year 2021.
Here’s what freelancers should take note of from the irs.gov announcement.
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.
You can deduct contributions to a traditional IRA if you meet certain conditions. However, if you are also covered by a retirement plan like a 401(k) through an employer — or your spouse is — your deduction may be reduced or phased out until it is eliminated, depending on your filing status and income.
These are the 2021 phase-out ranges for those who are also covered by a retirement plan at work:
For single taxpayers covered by a workplace retirement plan, the phase-out range is $66,000–$76,000, up from $65,000–$75,000.For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $105,000–$125,000, up from $104,000–$124,000.For an IRA contributor who is not covered by a workplace