IRS Announces 2018 IRA and Retirement Plan Limitations

The IRS has released Notice 2017-64 announcing the 2018 IRA and retirement plan limitations as adjusted for cost-of-living. The IRA contribution limit will remain the same as 2017, at $5,500 (plus $1,000 catch-up contribution if age 50 or older). The 401(k) plan deferral limit increases by $500 to $18,500 for 2018, but the catch-up amount remains at $6,000.

Several other IRA and retirement plan limitations will increase in 2018, as will the IRA and retirement plan contribution tax credit (commonly referred to as the “saver’s credit”) income amounts.

2018 IRA Contribution Limitations

Following are the 2018 IRA-related adjustments.

  • Traditional and Roth IRA contribution limit: $5,500 (unchanged)
  • Traditional and Roth IRA catch-up contribution limit: $1,000 (not subject to adjustments)
  • Traditional IRA deduction MAGI phase-out range for single and head-of-household taxpayers participating in employer-sponsored retirement plans (active participants): $63,000 to $73,000
  • Traditional IRA deduction MAGI phase-out range for married filing joint active participants: $101,000 to $121,000
  • Traditional IRA deduction MAGI phase-out range for taxpayers married to active participants: $189,000 to $199,000
  • Traditional IRA deduction MAGI phase-out range for married filing separate active participants: $0 to $10,000 (not subject to adjustments)
  • Roth IRA MAGI phase-out range for contribution eligibility for married filing joint taxpayers: $189,000 to $199,000
  • Roth IRA MAGI phase-out range for contribution eligibility for single filers and heads-of-households: $120,000 to $135,000
  • Roth IRA MAGI phase-out range for contribution eligibility for married filing separate: $0 to $10,000 (not subject to adjustments)

2018 Retirement Plan Limitations

Following are the key retirement plan limitations for 2018.

  • Annual deferral limit (IRC Sec. 402(g)) for 401(k), 403(b) and 457(b) plans, and the federal Thrift Savings Plan: $18,500
  • Catch-up contributions to 401(k), 403(b) and 457(b) plans, and the federal Thrift Savings Plan: $6,000 (unchanged)
  • Annual additions under IRC Sec. 415(c)(1)(A) for defined contribution plans: $55,000
  • Annual additions under IRC Sec. 415(b)(1)(A) for defined benefit pension plans: $220,000
  • Annual deferral limit for SIMPLE IRA and SIMPLE 401(k) plans: $12,500 (unchanged)
  • Catch-up contributions for SIMPLE IRA and SIMPLE 401(k) plans: $3,000 (unchanged)
  • IRC Sec. 401(a)(17) compensation cap: $275,000
  • Highly compensated employee definition income threshold: $120,000 (unchanged)
  • Top-heavy determination key employee definition income threshold: $175,000 (unchanged)
  • SEP plan employee income threshold for benefit eligibility: $600 (unchanged)
  • Qualified longevity annuity contract dollar limit: $130,000
  • Taxable wage base used in some integrated allocation formulas (announced by the Social Security Administration): $128,700

Retirement Savings Tax Credit

Taxpayers who make contributions to IRAs and/or salary deferrals under retirement plans may qualify for an income tax credit if their income is under certain amounts. Contributions of up to $2,000 may be eligible for credits that range from 10 to 50 percent of the amount contributed.

Eligibility is based on income and tax filing status as defined in the instructions for Form 8880, Credit for Qualified Retirement Savings Contributions, and these income limits are subject to cost-of-living adjustments. The maximum income thresholds in all categories for this credit will increase for 2018. For 2018, taxpayers with adjusted gross income that exceeds $63,000 for joint filers, $47,250 for head of household, and $31,500 for all other filers will not qualify for a tax credit.