The IRS has announced cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2016. Highlights include:
- The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), and most 457 plans remains unchanged at $18,000.
- The catch-up contribution limit for those aged 50 and over remains unchanged at $6,000.
- The limit on annual contributions to an individual retirement arrangement (IRA) 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 $61,000 and $71,000, unchanged from 2015.
- 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 remains unchanged at $98,000 to $118,000.
- 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 $184,000 and $194,000, up from $183,000 and $193,000.
Additional information on the adjusted and unchanged limitations is available in the IRS cost-of-living adjustment table.