If you’re prognosticating for 2016 already, you’ll be happy to know the Internal Revenue Service has got your numbers. The tax agency recently set the official limits for IRA, 401(k) and pension contributions. In short, there is some – but not much – change.
This will get a little detailed. We’ll spare you the complexities of pension plans, which also were announced.
So, here’s a general thumbnail from IRS Central:
401(k), 403(b) AND MOST 457 RETIREMENT PLANS
Contribution limits for 2016 remain the same as for this year at $18,000. The cost-of living index did not reach its trigger point for an upward change under federal law.
- The catch-up contribution for employees who are age 50 or older also remains unchanged at $6,000
TRADITIONAL IRAs and ROTH IRAs
- Annual contribution limits to Individual Retirement Arrangements stay at the 2015 level. $5,500.
- The catch-up contribution likewise doesn’t move. It still will be $1,000 in 2016, again setting the maximum contribution for working 50-year-olds and up at $6,500.
- The starting point for phasing out contributions to a Roth IRA generally will increase $1,000 in 2016. It will begin at $184,000 of adjusted gross income for married couples filing jointly, and at $117,000 in AGI for single taxpayers and for heads of households
- The phase-out for the deduction allowed for a traditional IRA also will go into effect at $184,000 in income instead of the current $183,000 for a married couple filing jointly in one type of situation. It occurs when one spouse holds another workplace retirement plan in addition to the IRA and one spouse does not.
RETIREMENT SAVER’S CREDIT
This credit also is subject to a limitation, based on adjusted gross income, and the limit will increase a few hundred dollars for most categories of taxpayers in 2016. The credit applies to low and moderate-income taxpayers who make retirement plan contributions. Here are the AGI levels where the credit disappears:
- Married filing jointly — $61,500, up $500 from 2015.
- Head of household — $46,125, up $375 from this year.
- Single or married filing separately — $30,750, up $250 from current range.
Otherwise, most of the limitations affecting retirement plans won’t change in 2016. For a complete rundown, take a look online at www.irs.gov/uac/Newsroom/IRS-Announces-2016-Pension-Plan-Limitations;-401(k)-Contribution-Limit-Remains-Unchanged-at-$18,000-for-2016.
The IRS even cites the tax codes involved. Of course, if you’d rather not dig into Section 414(v)(2)(B)(i) for catch-up contributions, EricJohn Ltd. can dig for you!