Tax Incentives for Retirement Savings (May 2020)

The proposal would repeal tax deductions for new contributions to retirement saving plans. These contributions remain eligible for the savers’ credit. Tax burden changes include the resulting change in current tax liabilities and the change in the net present value of future tax liabilities from withdrawals of accumulated assets from these contributions in retirement. Baseline is the law in place as of December 18, 2019.

The alternative cash-flow method  estimates the tax expenditures as the tax saving from deductions for qualified retirement plans, the savers’ credit, and current income accrued within qualified plans minus the present value of future withdrawals attributable to current contributions. Baseline is the law in place as of December 18, 2019, with the Tax Cuts and Jobs Act of 2017 (TCJA) permanently extended.

The proposal would change the maximum combined employer and employee contribution limit before catch-up contributions to $15,000 per employee. Catch-up contributions remain as under the current law. Tax liability changes include not only current-year changes in income and payroll tax liabilities but also changes in future taxes related to current-year contributions under the baseline. Baseline is the law in place as of December 18, 2019, with the Tax Cuts and Jobs Act of 2017 (TCJA) permanently extended.

The proposal would change the maximum combined employer and employee contribution limit before catch-up contributions to $15,000 per employee. Catch-up contributions would be repealed. Tax liability changes include not only current-year changes in income and payroll tax liabilities but also changes in future taxes related to current-year contributions under the baseline. Baseline is the law in place as of December 18, 2019, with the Tax Cuts and Jobs Act of 2017 (TCJA) permanently extended.

The proposal would repeal the deduction of elective contributions for individual retirement accounts (IRAs), Keogh plans, and employer-sponsored defined-contribution accounts, and introduce a revenue-neutral refundable 21.3 percent tax credit as a percentage of the eligible contributions. Estimates assume no change in future taxes. Baseline is the law in place as of December 18, 2019, with the Tax Cuts and Jobs Act of 2017 (TCJA) permanently extended.

The proposal would repeal the deduction of elective contributions for individual retirement accounts (IRAs), Keogh plans, and employer-sponsored defined-contribution accounts, but continue to allow Roth contributions. Tax burden changes include current-year changes in income tax liabilities and also account for changes in future taxes related to current-year contributions under the baseline. Baseline is the law in place as of December 18, 2019, with the Tax Cuts and Jobs Act of 2017 (TCJA) permanently extended.