Vrakas CPAs, Here Are Your Articles for Wednesday, December 21, 2016
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New Pension Plan Limitations Announced

 

As is typical, the government is making annual adjustments to various retirement plan limits. In many cases, those whose incomes are at higher levels may find they can put away a few more dollars.

To start with, the government has made changes regarding the deduction of contributions to traditional IRAs when you or your spouse are also covered by a retirement plan at work. The amounts above which the contribution deductions are being phased out have been raised.

  • For single taxpayers covered by a workplace plan, the phase-out range is $62,000 to $72,000, and that's up from $61,000 to $71,000.
  • For married couples filing jointly, the phase-out range is $99,000 to $119,000, up from $98,000 to $118,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out is based on the couple's income, between $186,000 and $196,000, up from $184,000 to $194,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not 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 is $118,000 to $133,000 for singles and heads of households, up from $117,000 to $132,000. For married couples filing jointly, the income phase-out range is $186,000 to $196,000, up from $184,000 to $194,000.

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, which is also known as the retirement savings contributions credit, for low- to moderate-income workers is $62,000 for married couples filing jointly, up from $61,500; $46,500 for heads of households, up from $46,125; and, $31,000 for singles and married individuals filing separately, up from $30,750.

Some limitations remain unchanged — and here are some to take notice of:

  • The contribution limit for employees who participate in 401(k), 403(b) or most 457 plans, or the federal government's Thrift Savings Plan, remains unchanged at $18,000.
  • The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b) or most 457 plans, or the federal government's Thrift Savings Plan, remains unchanged at $6,000.
  • The limit on annual contributions to an IRA remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

Finally, note that these numbers change regularly, so be sure to check current rules with an authoritative source before making decisions.

These rules can get complicated, so if you're unsure about how these changes affect your retirement accounts, consult with a financial professional who can go into the details.

 

 
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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