Contribution limits to rise for IRAs, 401(k)s

By Equity Trust Staff0 Comments

The contribution limit for a 401(k) will increase by $500 to $17,500 for tax year 2013, the IRS announced.

The limit, which was also increased by $500 for 2012, was triggered by a change in the cost of living index that determines when the amount is adjusted.

In addition, the limit on annual contributions to an IRA rises to $5,500, up from $5,000 in prior years.

The catch-up contribution limit for employees aged 50 and over who participate in 401(k) plans 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.

The AGI phase-out range for taxpayers making contributions to a Roth IRA is also on the rise. The range is $178,000 to $188,000 for married couples filing jointly, up from $173,000 to $183,000 in 2012.

For singles and heads of household, the income phase-out range is $112,000 to $127,000, up from $110,000 to $125,000. 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.

Need a refresher on the 2012 tax guidelines? Review the current contribution limits for several types of retirement accounts.