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Tax Reform Expands Retirement Contribution Limits

Notice 2018-83 details that taxpayers can now generally contribute more money to their retirement funds as part of the cost-of-living adjustment guidance.

Changes for 2019

The contribution limit for employees participating in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan is hiked from $18,500 to $19,000.

Annual contributions to an IRA are now capped at $6,000, up from the previous limit of $5,500. The additional catch-up contribution limit for individuals 50 years old and older remains at $1,000. It is not subject to the cost-of-living adjustment process.

Income ranges for determining a taxpayer’s eligibility to make deductible contributions to traditional IRAs, to contribute to Roth IRAs and to claim the Saver’s Credit also were increased for 2019.

Contributions to a traditional IRA are deductible if the taxpayer meets certain conditions. If during the year either the taxpayer or their spouse was covered by a retirement plan at work, the deduction could be reduced or phased out until it’s eliminated (depending on filing status and income). Phase-outs of the deduction won’t apply if neither partner is covered by a work retirement plan.

Here are the phase-out ranges for 2019 from the IRS:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is $64,000 to $74,000, up from $63,000 to $73,000.
  • For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $103,000 to $123,000, up from $101,000 to $121,000.
  • 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 $193,000 and $203,000, up from $189,000 and $199,000.
  • 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 $122,000 to $137,000 for singles and heads of household, up from $120,000 to $135,000. For married couples filing jointly, the income phase-out range is $193,000 to $203,000, up from $189,000 to $199,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to cost-of-living adjustment and remains $0 to $10,000.

The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $64,000 for married couples filing jointly, up from $63,000; $48,000 for heads of household, up from $47,250; and $32,000 for singles and married individuals filing separately, up from $31,500.

The catch-up contribution cap for employees 50 years old and older who participate in 401(k), 403(b), most 457 plans and the federal Thrift Savings Plan remains unchanged at $6,000.

Bob Williams

Forget genes; I’ve got words in my DNA. Communication has been part of who I am nearly all my life. From a long career in radio news to another one in newspapers – and a University of Georgia journalism degree sandwiched between the two – language has been my life. I’ve also been fortunate to have learned the tax business from the ground up here at Drake, starting with 1040.com online forms some years ago before moving on to work on the Web. In all things tax-ish, we aim to give you tools you can use.

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