High-income 401k earners lose the tax break starting in 2026 under the new rules

A popular tax break for workers nearing retirement age to make extra contributions will be changed next year, limiting access for some high earners.

The IRS issued new regulations last month implementing a provision of a 2022 law known as the SECURE Act 2.0, which requires high earners who earned $145,000 or more in gross income as an individual in the previous year to provide bonuses. 401(k) catch-up contributions To after-tax Roth accounts starting in tax year 2026.

Under the rules, which will remain in effect through tax year 2025, workers age 50 and older were eligible to make their 401(k) catch-up contributions to either a traditional pre-tax account or a traditional pre-tax account. Roth after tax account, depending on their preferences and what their retirement plan allows.

Making catch-up contributions on a pre-tax basis allowed workers to take an advance tax break by using a deduction to reduce their taxable income — but the change means those with income above the income threshold will no longer have that option starting in the 2026 tax year.

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Catch-up contributions are made in addition to the usual Contributions to 401(k) accounts..

In 2025, eligible workers over age 50 can make an additional $7,500 in 401(k) contributions in catch-up contributions, on top of the standard contribution limit of $23,500 for workers under age 50.

There is also a cap for workers ages 60 to 63, who can pay up to $11,250 in catch-up contributions in 2025.

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Workers whose employer-sponsored retirement plans do not currently have Roth 401(k) options may not be able to make catch-up contributions until one becomes available.

the The Wall Street Journal reported Employers have added Roth 401(k) options, with Fidelity now listed as an option in 95% of plans managed, up from 73% two years ago, while 86% of 401(k) plans managed by Vanguard offer a Roth.

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While savers who contribute to traditional 401(k) accounts get the tax break upfront, they owe income taxes on future withdrawals.

In contrast, contributions to Roth accounts lacked the initial tax break, but they were Tax-free growth And the withdrawal.