If you’re saving for retirement, you’re likely taking advantage of financial products that may have employer matching contributions, or provide tax breaks. If you fall into this category (and you should!) the terms 401K, Traditional IRA and Roth IRA should mean something to you. There are, of course, limitations put on these products by the government as to how much you can contribute. The IRS has recently announced changes to these limitations for the 2018 tax season that may affect you.
Here are some of the highlights:
401(k) Plan Contribution Limit Change
For the 2018 tax season, the contribution limit for people participating in a 401(k) retirement plan increases from $18,000 to $18,500.
Traditional IRA Tax Deduction Phase-Out Ranges
Contributions to a traditional IRA by taxpayers covered by a workplace retirement plan are tax deductible until participants reach an income threshold. Once the threshold is reached the amount that deduction that can be claimed is reduced until it is completely phased out at fixed top income limit.
- For single taxpayers, the phaseout range is increased to $63,000 to $73,000 up from $62,000 to $72,000.
- If a married couple is filing jointly, and the spouse making the IRA contribution is covered by a workplace retirement plan the phase-out range is increased from $99,000 to $119,000 to $101,000 to $121,000.
- If an IRA contributor is not covered by a workplace retirement plan and is married to someone who is, the phase-out range for the couple’s income is increased from $186,000 to $196,000 to $189,000 to $199,000.
Roth IRA Contribution Phase-Out Ranges
Taxpayers can contribute the maximum amount allowed by the IRS to a Roth IRA until an income threshold is met. Once the threshold is met, the amount that can be contributed is reduced until it is completely phased out at a fixed top income limit.
- For single taxpayers or heads of household, the income phase-out range increased from $118,000 to $133,000 to $120,000 to $135,000.
- The income phase-out range for married couples filing jointly increased to $189,000 to $199,000 from $186,000 to $196,000
These are just the highlights of limitations that have been adjusted by the IRS for the 2018 tax year. For full details of the changes coming in the 2018 tax year, reference IRS notice 2017-64.