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IRS Reaffirms Retirement Plan Contributions Limits for 2018 by Nancy M. Valdes, CPA

Posted on May 30, 2018 by Nancy Valdes

Tax season is here, and most taxpayers are focused on gathering documentation to file their 2017 tax returns by the April 17, 2018, deadline. Yet, it’s also important for taxpayers to consider the cost-of-living adjustments that the IRS has applied to retirement plan contributions in 2018, which taxpayers will report on their returns in 2019.

The maximum amount an individual taxpayer can contribute via salary deferrals to an employer-sponsored 401(k), 403(b) and most 457 plans increases to $18,500 in 2018, up $500 from the prior two tax years. However, the catch-up contribution limit for savers 50 and older remains at $6,000 in 2018.

The 2018 contribution limits to IRAs and Roth IRAs remains unchanged at $5,500, with an additional $1,000 allowance for savers age 50 and older. Taxpayers who have not yet maximized their IRA contributions for 2017 still have an opportunity to do so by April 17, 2018, and apply that amount to their 2017 tax returns.

For 2018, the IRS has increased the income eligibility thresholds for taxpayers to contribute to traditional IRAs and Roth IRAs. For single taxpayers covered by a workplace retirement plan, the income phase-out range is $63,000 to $73,000. For married couples filing jointly in which the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $101,000 to $121,000. The income phase-out range for taxpayers making contributions to Roth IRAs increased to $120,000 to $135,000 for singles and heads of household, or $189,000 to $199,000 for married couples filing jointly.

The maximum amount you may contribute in 2017 to a traditional IRA or Roth IRA before April 15, 2017, is $5,500, or $6,500 if you are age 50 or older. The type of IRA you are eligible to set up will depend on your filing status and annual income.

With the reality of tax reform effective Jan. 1, 2018, it is important that individuals take the time now to understand how the new law will ultimately impact on their future tax liabilities for 2018 and beyond. Under the guidance of experienced accountants, taxpayers may begin planning now to minimize their tax liabilities in the future.

About the Author: Nancy M. Valdes, CPA, is a senior manager with Berkowitz Pollack Brant’s Tax Services practice, where she works with U.S. and foreign-based entrepreneurs and closely held businesses to manage cash flow, protect assets and maintain tax efficiency.  She can be reached at the CPA firm’s Miami office at (305) 379-7000 or via email at info@bpbcpa.com.

 

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