Income ranges for determining deductible contributions to retirement plans and to claim the saver’s credit have increased for tax year 2017, the IRS announced on Oct. 27.
However, the limit for employees who contribute to 401(k) plans, 403(b) plans, most 457 plans, and the federal government’s Thrift Savings Plan remains at $18,000.
Code Section 415 sets monetary limitations on benefits and contributions involving qualified retirement plans. Treasury is required to annually adjust the limits according to cost-of-living adjustments.
Here are highlights of limitations that have changed or stayed the same for 2017:
Contributions are deductible if they meet certain requirements. If taxpayers or their spouses were covered by a retirement plan through employers during the year, deductions may be phased out or reduced until they are eliminated – depending on income and filing status. However, if taxpayers or their spouses were not covered by employers’ retirement plans, the phase-outs aren’t pertinent.
For singles, the phase-out income range is $62,000 to $72,000, up from $61,000 to $71,000 for 2016.
For married taxpayers who file jointly and the spouse making the contribution is covered by an employer’s retirement plan, the phase-out range is $99,000 to $119,000, up from $98,000 to $118,000.
For a spouse not covered by an employer’s retirement plan but is married to someone who is covered, the deduction phases out if their joint income is between $186,000 and $196,000, up from $184,000 and $194,000.
For a married taxpayer who files a separate return and is covered by an employer’s plan, the phase-out range is not subject to annual cost-of-living adjustments and remains at $0 to $10,000.
For singles and heads of households, the income phase-out range for contributions to these retirement plans is $118,000 to $133,000, up from $117,000 to $132,000 for 2016.
For married couples filing jointly, the phase-out range is $186,000 to $196,000, up from $184,000 to $194,000.
For a married taxpayer who files separately and makes contributions, there is no annual cost-of-living adjustment, and the range remains at $0 to $10,000.
For married couples filing jointly, the income limit is $62,000, up from $61,500 for 2016.
For heads of households, it’s $46,500, up from $46,125.
For singles and married taxpayers who file separately, the limit is $31,000, up from $30,750.
Effective Jan. 1, 2017, annual benefit limits under a defined benefit plan will increase from $210,000 to $215,000. For a participant who left the employer before Jan. 1, the limit is computed by multiplying the participant’s compensation limitation adjusted through 2016 by 1.0112.
What Else Remains Unchanged?
The catch-up contribution limit for employees age 50 or older who participate in 401(k) plans, 403(b) plans, most 457 plans, and the Thrift Savings Plan stays at $6,000.
The limit for annual contributions to an IRA stays at $5,500. For taxpayers at least 50 years old who make an additional catch-up contribution, the limit remains at $1,000.
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.