The IRS Still Likes COLA
The IRS has reported that due to an increase in the cost-of-living index, the elective deferral (contribution) limit for employees who participate in 401(k), 403(b) most 457 plans and the federal government’s Thrift Savings Plan is increased from $17,000 to $17,500. The catch up contribution for employees aged 50 years and over remains unchanged.
KEY POINT: Cost-of-living adjustments have triggered adjustments to many dollar limitations for pension plans and other retirement-related items for tax year 2013.
Among other highlights:
• The limit on annual contributions to an IRA rises to $5,500 from $5,000.
• 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 between $59,000 and $69,000, up from $58,000 and $68,000 in 2012. 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 $95,000 to $115,000, up from $92,000 to $112,000. 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 $178,000 and $188,000, up from $173,000 and $183,000.
• The AGI (adjusted gross income) phase-out range for taxpayers making contributions to a Roth IRA is $178,000 to $188,000 for married couples filing jointly, up from $173,000 to $183,000 in 2012. For singles and heads of household, the income phase-out range is $112,000 to $127,000, up from $110,000 to $125,000. For a married individual filing a separate return who is covered by a retirement plan at work, the phase-out range 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 $59,000 for married couples filing jointly, up from $57,500 in 2012; $44,250 for heads of household, up from $43,125; and $29,500 for married individuals filing separately and for singles, up from $28,750.
CONTACT US: It is never too soon to start tax planning, and there are still many steps you can take before the end of the year that might save you money on your taxes. If you have questions regarding these limit adjustments for 2013 and the impact on your tax and financial planning, please contact Jeff Bolton, CPA, Partner, at 561-367-1040 or [email protected]