Employees can contribute another $500 per year to their 401(k)s or 403(b)s in 2013, with the elective deferral limit climbing to $17,500, the Internal Revenue Service said today.
This is the second consecutive year that the IRS has bumped up the limit by $500 as a result of cost-of-living adjustments.
The so-called “catch-up contribution” limit for employees over 50 remains unchanged at $5,500. That’s above the $17,500 limit.
The IRS announced other cost-of-living adjustments on dollar limitations for pension plans and other retirement-related items for 2013. Some limitations will remain unchanged because the increase in the index did not meet the legal thresholds that trigger their adjustment.
Other 2013 adjustments: taxpayers can gift as much as $14,000 tax-free in 2013, up from $13,000; and U.S. citizens living abroad can exclude $97,600 in foreign earnings from their taxable income, up from $95,100.
Here are the top changes highlighted today by the IRS for 2013:
- The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,000 to $17,500.
- The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $5,500.
- The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $59,000 and $69,000, up from $58,000 and $68,000 in 2012.
- For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $95,000 to $115,000, up from $92,000 to $112,000.
- For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $178,000 and $188,000, up from $173,000 and $183,000.