The Internal Revenue Agency (IRS) has announced the 2016 401(k) and IRA Contribution Limits, which were published on October 21, 2015. The pension plan limitation, generally speaking, will not change for the 2016 year, because the cost-of-living increase did not meet the threshold to trigger any adjustment. The following explains the adjustments that have and have not been made to contribution limits for the 2016 tax year:
The 401(k) and catch-up contribution limits remain the same as they were in 2015. Employees are able to contribute up to $18,000 towards their 401(k) in 2016. Those over the age of 50-years-old are able to contribute an additional $6,000.
Similarly, the annual limit upon Individual Retirement Arrangement (IRA) and catch-up contributions will remain the same as they were last year, in 2015. Individuals are able to contribute up to $5,500 towards their IRA in 2016. The catch-up contribution limit for individuals over the age of 50 remains $1,000.
One change to note is the adjustment to the phase-out rage for taxpayers making contributions to a Roth IRA. This change will affect you if you are filing jointly and earning between $184,000 and $194,000 per year, which is an increase of $1,000 from 2015. Singles and heads of households will be affected by this change if they earn between $117,000 and $132,000, which is also an increase of $1,000 from 2015.
Another minor change to take note of is one that will only affect IRA contributors who are not covered by a workplace retirement plan and are married to someone that is covered. For those who are in this situation, the deduction is phased out if the couple’s income is between $184,000 and $194,000, which is a $1,000 increase from 2015.
Lastly, the AGI limit for the saver’s credit, which is also known as the retirement savings contribution credit, for low- and moderate-income workers has been changed to $61,000 for married couples, to $46,125 for heads of household, and $30,750 for singles and married individuals filing separately.
Please let us know if you have any questions about the new contribution limits. For more information, please see the IRS publication.