Today the Internal Revenue Service announced cost-of-living adjustments that affects limitations for pension plans and other retirement-related items for Tax Year 2012. What this means to you: Larger income tax deductions!
Here are some highlights:
- The limit for employees who participate in 401(k), 403(b), and most 457 plans is increasing from $16,500 to $17,000 per year.
- The catch-up contribution limit for those age 50 and over remains unchanged at $5,500 per year.
- The deduction for contributions to an Individual Retirement Account (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 $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, up from $90,000 to $110,000. For a person who is not covered by a workplace retirement plan and is married to someone who is covered, the IRA deduction is phased out if the couple’s income is between $173,000 and $183,000, up from $169,000 and $179,000.
- The phase-out range for taxpayers making contributions to a Roth IRA is an AGI from $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 limit for the saver’s credit (also known as the retirement savings contributions credit) for low-and moderate-income workers is an AGI of $57,500 for married couples filing jointly, up from $56,500 in 2011; an AGI of $43,125 for heads of household, up from $42,375; and an AGI $28,750 for married individuals filing separately and for singles, up from $28,250.
Are you saving enough for your retirement? Do you need more tax deductions?
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