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The Complete Payroll Blog

IRS announces 401(K) contribution limits for 2018

Posted by Complete Payroll | Dec 14, 2017 6:03:00 AM

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The Internal Revenue Service (IRS) just increased the 401(k) contribution limit for 2018. In 2018, investors will be able to contribute up to $18,500 of their paycheck to their workplace retirement plan. This increase is $500 above the previous limit. It's also the IRS's first increase since 2015.

Maximum contribution from all sources also increasing

But that only includes what employees contribute to employer-sponsored plans like 401(k)s, 403(b)s, most 457 plans and the Thrift Savings Plan (for federal employees).

The maximum contribution from all sources will also be increasing (by $1,000 from last year) to $55,000.

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IRAs and income phase-outs

Contribution limits to Roth or traditional individual retirement accounts are staying the same at $5,500. However, income phase-out ranges are coming.

If an employee and their spouse are not covered by a retirement plan at work, they're allowed to deduct from their taxes what they contribute to a traditional IRA. (Learn more about the IRA deduction limits from the IRS website here.)

That being said, if an employee or their spouse has a workplace retirement plan (or access to one), the amount they can deduct from their taxes phases out - based on their income and filing status. Here are the new phase-out ranges:

  • $63,000 to $73,000 for single taxpayers (up $1,000 from last year)
  • $101,000 to $121,000 for married couples filing jointly, where the IRA contributor is covered by a workplace retirement plan (up $2,000 from last year) 
  • $189,000 to $199,000 for married couples filing jointly, where the IRA contributor is not covered by a workplace plan but their spouse is (up $3,000 from last year) 

Income also determines whether or not an employee is eligible to contribute to a Roth IRA. The new phase-out ranges for 2018 are:

  • $120,000 to $135,000 for single taxpayers (up $2,000 from last year)
  • $189,000 to $199,000 for married couples filing jointly (up $3,000)

The catch-up contribution limits for those 50 and older have not changed. It’s still $6,000 for employer-sponsored plans and $1,000 for IRAs.

 

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Topics: Benefits, Payroll, Employees

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