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Are 401k and IRA contributions reduced for new, part-year, US residents?

Personal Finance & Money Asked on October 1, 2021

Suppose I move to the US partway through the year and start working. I will file a dual-status tax return. My employer offers a 401k plan and I want to contribute as much as I am permitted. I understand the maximum employee contribution for 2021 is $19,500.

Despite not being a tax resident (or any other kind of resident) for the full year, am I allowed to contribute the full $19,500 if I want to? Or does this get reduced based on how many days of the year I am a tax resident of the US?

Likewise for the $6,000 IRA limit?

One Answer

I think the contribution limits are the same. Both resident aliens and nonresident aliens have the same contribution limit for IRAs -- $6,000 or their taxable compensation, whichever is less (although for nonresident aliens they can only count the compensation that is effectively connected to the US). I think the same is true for 401(k) contributions.

Correct answer by user102008 on October 1, 2021

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