The IRS (Internal Revenue Service) made an announcement on October 27, 2016 about their yearly adjustments on the limitations in dollar amounts of pension plans in 2017. Some of the elements in the maximum contributions to 401k have remained unchanged, while others have seen some adjustments. It is important to be aware of these changes if you currently have a 401k.
Unchanged Limitations:
– The contribution limit for people who have a 401k has remained the same, which is $18,000.
– The limit on catch-up contributions for employees with a 401k who are over 50 has also remained the same at $6,000.
– The limit placed on annual contributions for IRA plans is still $5,500. Similarly, the catch-up contribution has stayed the same at $1,000, which is for those who are over the age of 50. This is because it is not subject to adjustments for annual cost of living.
Maximum Contributions to 401k Changes for 2017:
There have been some significant changes as well. This is particularly true for the income range that determines whether or not someone is eligible for deductions as part of the IRA. Additionally, how much people can claim in saver’s credit has also increased.
Now, it is possible to deduct traditional IRA contributions, so long as certain conditions are met. If the taxpayer or their spouse had an employment retirement plan during the year, it is possible that their deduction will be lowered, or that it will be phased out. This does depend, however, on their income and filing status. If neither have an employee retirement plan, the phase out is not applicable. Phase out ranges for maximum contributions to 401k are as follows:
– Single taxpayers in an employee retirement plan have a phase out range of between $62,000 and $72,000, a $1,000 increase on each side.
– Married couples with joint filings, if the contribution is part of an employee plan, have a phase out range of between $99,000 and $119,000, another $1,000 increase.
– IRA contributors who do not take part in an employee retirement plan, but who are married to someone who has one, will have a phased out deduction only if their joint income is between $186,000 and $196,000, a $2,000 increase.
– A married individual with a separate return and an employee retirement plan, has a phase out range of between $0 and $10,000, which is unchanged.
– Then, there is the phase out for those people who contribute to a Roth IRA. In that case, the phase out range is between $118,000 and $133,000 if the filer is single or head of household, which is a $1,000 increase. For those making a joint filing, the range is now $186,000 to $196,000, a $2,000 increase. Married individuals with separate fillings have an unchanged adjustment, and it still stands at between $0 and $10,000.
– For saver’s credit, which is available for people with low to moderate income, is now $62,000 for jointly filing married couples, a $1,000 increase. For heads of households, it is $46,500, a $375 increase. For separately filing and single individuals, it is $31,000, a $250 increase.
