The Internal Revenue Service has increased the maximum pre-tax contribution limit for 401(k)and 403(b)retirement plans,most 457 plans,and the federal government‘s Thrift Savings Plan by $500,from $16,500 to $17,000,as a result of cost-of-living adjustments.
The IRS noted Thursday that many of the pension plan limitations will change for 2012 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. However,other limitations will remain unchanged.
The IRS said the catch-up contribution limit for those aged 50 and over remains unchanged at $5,500.
The Social Security Administration announced a COLA increase on Wednesday,giving beneficiaries a 3.6 percent increase in annual benefits,so the average retiree can expect an extra $512 in annual benefits in 2012,increasing on average from $14,232 to $14,744. Based on that increase,the maximum amount of earnings subject to the Social Security tax will increase to $110,100 from $106,800. Of the estimated 161 million workers who will pay Social Security taxes in 2012,approximately 10 million of them will pay higher taxes as a result of the increase in the taxable maximum,according to Social Security.
The IRS said 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 between $58,000 and $68,000,up from $56,000 and $66,000 in 2011.
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 $92,000 to $112,000,an increase from $90,000 to $110,000. 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 $173,000 and $183,000,up from $169,000 and $179,000.
The AGI phase-out range for taxpayers making contributions to a Roth IRA is $173,000 to $183,000 for married couples filing jointly,up from $169,000 to $179,000 in 2011. For singles and heads of household,the income phase-out range is $110,000 to $125,000,up from $107,000 to $122,000. For a married individual filing a separate return who is covered by a retirement plan at work,the phase-out range remains $0 to $10,000.
The AGI limit for the saver‘s credit (also known as the retirement savings contributions credit)for low-and moderate-income workers is $57,500 for married couples filing jointly,up from $56,500 in 2011;$43,125 for heads of household,up from $42,375;and $28,750 for married individuals filing separately and for singles,up from $28,250.
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