4042 / What limits exist with respect to excludable contributions to a tax sheltered annuity?

An employee generally can exclude from gross income the contributions paid by the employee’s IRC Section 501(c)(3) or public school employer to a retirement annuity for the employee’s benefit.¹ The amount that the employee may exclude in the employee’s tax year is limited.

For taxable years beginning after 2001, there are two limits to be considered. The first is the overall limit ( Q 4043). The second is the limit on the amount that may be excluded under a salary reduction agreement ( Q 4047).²

For taxable years beginning after 2001, the exclusion allowance is permanently repealed.³