Employees will be allowed to contribute an extra $500 to their 401(k) next year.
The IRS on Thursday announced 2018 contribution limits for retirement accounts, the result of cost-of-living adjustments. The limit on elective deferral for contributions to 401(k) plans, 403(b) plans, most 457 plans, and the federal government’s Thrift Savings Plan will increase from $18,000 in 2017 to $18,500 for 2018. It’s the first time since 2015 that 401(k) contribution limits have increased.
However, the catch-up contribution limit for employees aged 50 and over who participate in those plans remains unchanged at $6,000.
Also unchanged are contribution limits for traditional and Roth IRA plans; those stayed flat at $5,500, with catch-up contributions of $1,000 for those 50 and over.
The limitation for defined contribution plans moves to $55,000 for 2018, up from the 2017 limit of $54,000. The limitation on the annual benefit of a defined benefit plan goes up from $215,000 in 2017 to $220,000 in 2018.
Income ranges for IRA deduction phaseouts — for those covered by a workplace retirement plan such as a 401(k) — also changed for 2018.
For single taxpayers with a workplace retirement plan, the deduction is phased out for those making $63,000-$73,000, up from $62,000-$72,000. For married couples filing jointly, where the IRA contributor is covered by a workplace plan, the income phaseout range climbs to $101,000-$121,000, from the previous range of $99,000-$119,000. Finally, for couples where the individual contributor isn’t covered by a plan, but their spouse is, the income phaseout range increases to $189,000-$199,000 from $186,000-$196,000.
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