The IRS has released its 2018 tax updates via Notice 2017-64. Highlights are provided below. Remember these updates are for 2018 taxes filed in 2019. For the upcoming 2017-18 tax year, I have included links (for filings due next year by April 17, 2018) where applicable.

  • The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased by $500 from $18,000 to $18,500. See this article for more details and year over year changes.
  • 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 remains unchanged at $6,000.
  • The limitation for defined contribution plans is increased from $54,000 to $55,000.
  • The annual compensation limit is increased from $270,000 to $275,000.

Traditional IRA phase-out income ranges for 2018 were also increased (see 2017 levels), which allows more tax payers to claim IRA deductions if they earn below these levels:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is $63,000 to $73,000, up from $62,000 to $72,000.
  • For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $101,000 to $121,000, up from $99,000 to $119,000.
  • 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 $189,000 and $199,000, up from $186,000 and $196,000.
  • 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 2018 income phase-out range for taxpayers making contributions to a Roth IRA is $120,000 to $135,000 for singles and heads of household, up from $118,000 to $133,000. For married couples filing jointly, the income phase-out range is $189,000 to $199,000, up from $186,000 to $196,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The limit on tax deductible annual contributions to an IRA remains unchanged at $5,500. 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.

The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $63,000 for married couples filing jointly, up from $62,000; $47,250 for heads of household, up from $46,500; and $31,500 for singles and married individuals filing separately, up from $31,000.

The compensation amount regarding simplified employee pensions (SEPs) remains unchanged at $600, while the limitation regarding SIMPLE retirement accounts remains unchanged at $12,500.

The dollar limitation concerning the definition of key employee in a top-heavy plan remains unchanged at $175,000. while the limitation used in the definition of highly compensated employee remains unchanged at $120,000

All the above date is based on current IRS guidelines and does not factor in any potential Trump related tax reforms.

Source: IRS.gov



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