The Internal Revenue Service announced on Thursday cost of living contribution increases for pension and other retirement plans for tax year 2015, which includes $500 increases to 401(k)s, 403(b)s and most 457 plans — from $17,500 to $18,000 — as well as catch-up contributions for employees aged 50 and older.
The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan will increase from $5,500 to $6,000.
The limit on annual contributions to an individual retirement account remains unchanged at $5,500, while 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.
In addition, the IRS said that the deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000, up from $60,000 and $70,000 in 2014.
A recent Government Accountability Office report found that for tax year 2011 (the most recent year available), an estimated 43 million taxpayers had IRAs with total reported fair market value of $5.2 trillion. About 99% of those taxpayers had aggregate IRA balances (including inherited IRAs) of $1 million or less, GAO says.
For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $98,000 to $118,000, up from $96,000 to $116,000.
For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $183,000 and $193,000, up from $181,000 and $191,000.
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 AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $61,000 for married couples filing jointly, up from $60,000 in 2014; $45,750 for heads of household, up from $45,000; and $30,500 for married individuals filing separately and for singles, up from $30,000.
— Check out Fiduciary Rule to Snag BDs on IRA Rollovers on ThinkAdvisor.