Pension plan contributions, retirement account contributions and certain amounts of retirement savings have been tax-deductible up to a point for decades. This is both good and bad news: on the one hand, the tax deductions are here to stay; on the other hand, they don’t tend to change or increase very much or very often. However the IRS recently announced a set of changes for 2017 that included several increases. Specifically, the new 2017 limits increased the phase-out line above which people who have retirement plans partially funded or matched by their employers lose their deductions on contributions they make to those plans on several different retirement plans.
For traditional IRAs, for example, the following increases were enacted:
- For single filers with a workplace IRA, the phase-out rose from $61,000-$71,000 to $62,000-$72,000
- For married joint filers where the IRA contributor has a workplace IRA, the phase-out rose from $98,000-118,000 to $99,000-$119,000
- For married joint filers where an IRA contributor doesn’t have a workplace IRA but their spouse does, the phase-out rose from $184,000-$194,000 to $186,000-$196,000
For Roth IRAs, similar increases took place:
- For single filers and heads of households, the phase-out rose from $117,000-$132,000 to $118,000-$133,000
- For married joint filers, the phase-out rose from $184,000-$194,000 to $186,000-$196,000
A few other plans have seen their limits increase as well:
- Traditional pension plans increased their annual benefit limit from $210,000 to $215,000
- Workplace-matched 401(k) accounts increased their allowed annual contribution limit from $53,000 to $54,000
Finally, the income limit for the retirement savings tax credit has gone up slightly across the board:
- Up $250 for single and married-filing-separately ($30,750 to $31,000)
- Up $375 for heads of households ($46,125 to $46,500)
- Up $500 for married-filing-jointly ($61,500 to $62,000)
Now here are a few places where the limits haven’t changed from 2016 to 2017.
- For both traditional and Roth IRAs, married-filing-separately contributors still have their contribution deductions phased out between $0 and $10,000
- Contribution limits on other 401(k)s, 403(b)s, 457s and Thrift Plan accounts are still $18,000
- Catch-up contribution limits on the above accounts are still $6,000
- Annual IRA contribution limits remain $5,500
- Catch-up IRA contribution limits remain $1,000
These new changes may or may not apply to you, but hopefully at least some of them do. Either way, knowing exactly what contributions you can make and deduct will save you money, bolster a potential audit defense, and give you some easy peace of mind.