The Internal Revenue Service issued the annual cost of living adjustments Thursday for 401(k) contributions, pension plans and other retirement-related matters.
The contribution limit for workers who are enrolled in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan has grown from $18,000 to $18,500.
The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements, to contribute to Roth IRAs and to claim the saver’s credit have also increased for 2018.
Taxpayers are able to deduct contributions to a traditional IRA if they meet certain conditions. If either the taxpayer or their spouse was covered by a retirement plan at work over the course of the year, the deduction could be reduced, or phased out, until it’s eliminated, depending on their filing status and income. (If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-outs of the deduction don’t apply.) Here are the phase-out ranges for 2018:
• For single taxpayers covered by a workplace retirement plan, the phase-out range goes from $63,000 to $73,000, up from $62,000 to $72,000.
• For married couples who file jointly, where the spouse making the IRA contribution is covered by a retirement plan at work, the phase-out ranges from $101,000 to $121,000, up from $99,000 to $119,000.
• For an IRA contributor who isn’t covered by a workplace retirement plan and is married to a spouse who is covered, the deduction is phased out if the couple’s income ranges between $189,000 and $199,000, up from $186,000 and $196,000.
• For a married taxpayer filing a separate return who’s covered by a retirement plan at work, the phase-out range isn’t subject to an annual cost-of-living adjustment and remains $0 to $10,000.
The income phase-out range for taxpayers making contributions to a Roth IRA goes from $120,000 to $135,000 for singles and heads of household, up from $118,000 to $133,000. For married couples who file jointly, the income phase-out range is $189,000 to $199,000, up from $186,000 to $196,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
The income limit for the Saver’s Credit (also referred to as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $63,000 for married couples filing jointly, up from $62,000; $47,250 for heads of household, up from $46,500; and $31,500 for singles and married individuals filing separately, up from $31,000.
Some limitations are unchanged from 2017:
• The limit on annual contributions to an IRA stays unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over isn’t subject to an annual cost-of-living adjustment and remains $1,000.
• The catch-up contribution limit for employees ages 50 and over who contribute to 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan remains unchanged at $6,000.
For more details and technical guidance, see IRS Notice 2017-64.