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2020 By The Numbers

Retirement Funding Taxes

Another year is coming to a close and with it, adjusted limits in regards to your investment accounts and to your taxes. Here are some changes going into effect on January 1st.

Retirement Plan Contribution Limits

The amount you can contribute to different types of retirement accounts has changed.

  • The amount you can contribute to TSP, a 401(k), 403(b) and most 457 plans has increased to $19,500
    • The catch-up contribution (for those 50 and older) limit also went up to $6,500
    • That makes the combined limit of $26,000 for those age 50 and older
  • Defined Contribution limits increased by $1,000 to $57,000
    • Applies to contributions to TSP while deployed to a combat zone
    • Also affects SEP IRA and Solo 401(k) plans
    • Salary deferred to a TSP, 401(k) 403(b) plan plus employer match are limited by this amount
    • Applies to 401(k) after tax contributions (combined with tax-deferred and/or Roth contributions)
  • Simple Plan contributions increased to $13,500
  • IRA contribution limits remain limited to $6,000 and catch-up contributions remain at $1,000
    • The ability to contribute to a Roth IRA phases out with income. For a married couple the ability to contribute is completely phased out at $206,000
    • There are no income limits for contributing to a Traditional IRA. However, the ability to deduct the contribution can be limited based on income and the existence of a retirement plan at work

Tax Changes

The following changes will affect your 2020 taxes.

  • Standard Deduction
    • The Standard Deduction for those filing Married Filing Jointly (MFJ) increased by $400 to $24,800
    • The Standard Deduction for those filing Single increased by $200 to $12,400
    • The Standard Deduction for those filing Head of Household (HoH) increased to $18,650
  • Special Capital Gains Tax Rate
    • The o% Long-Term Capital Gains Tax Rate is available as follows
      • Taxable income less than or equal to $40,000 for single
      • Taxable income less than or equal to $80,000 for MFJ
      • Taxable income less than or equal to $53,600 for HoH
    • The 15% Long-Term Capital Gains Tax Rate is available as follows
      • Taxable income less than or equal to $441,450 for single
      • Taxable income less than or equal to $496,600 for MFJ
      • Taxable income less than or equal to $469,050 for HoH
    • 20% tax rate applies for long-term capital gains when taxable income is above the 15% limit
    • Net Investment Income Tax of 3.8% applies to capital gains (as well as other investment income) if Modified Adjusted Gross Income (MAGI) is above $200,000 for single and HoH and $250,000 for MFJ
  • Tax Brackets were adjusted to reflect inflation
  • There is a new Form W-4

Taxes and investments are always changing. That's why we spend all day every day checking up on them.

If you found this article useful, you might like the following blog posts:

DFAS Announces Release Dates for Tax Forms

TSP In a Combat Zone Part III: How Does It Work?

I'm About to Retire From the Military. What Should I Do With My TSP?


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