401(k) and IRA Contribution Limits Set to Increase Next Year

Many employers offer 401(k) plans to their employees, which allow individuals to place a portion of their paycheck automatically into their retirement savings account. While there are a lot of advantages to investing in 401(k) plans, there are also limits to how much a person can contribute. There are similar limits to the kinds of deductions that investors can claim when contributing to an Individual Retirement Account (IRA), which is another type of retirement savings account that comes with tax advantages. Every fall, the IRS assesses and sometimes adjusts the maximum contribution limits for 401(k) plans, as well as Individual Retirement Accounts (IRAs), and other retirement savings accounts. The agency recently announced that as a result of these adjustments, taxpayers will now be able to contribute up to $23,000 in their 401(k) accounts, an increase of $500. The limit on annual contributions to IRAs also went up by $500 to $7,000.

401(k) and IRA Contribution Limits for 2024 

Next year, the contribution limit for employees who participate in an employer’s 401(k) plan will be $23,000, while the catch-up contribution limit for those who are 50 years of age or older will remain at $7,500. This means that 401(k) participants who are over the age of 50 years old can contribute a total of $30,500 starting next year. The limit for yearly IRA contributions also increased from $6,500 to $7,000. These are not, however, the only changes made to IRA contribution limits.

Income Ranges for Determining Deductible IRA Contributions 

Taxpayers are allowed to deduct any contributions they may to a traditional IRA, but only if they meet certain eligibility requirements. If, however, either a taxpayer or his or her spouse was covered by a retirement plan at work, then these deductions could be reduced and phased out until eventually eliminated. The income ranges that the IRS uses to determine eligibility for deductible contributions are also set to increase next year as follows:

• For single taxpayers the phase-out range has been increased to between $77,000 and $87,000;
• For married couples who are filing their returns jointly, when the contributing spouse is covered by a workplace retirement plan, the phase-out range has bone up to between $123,000 and $143,000;
• For IRA contributors whose spouses are covered by a workplace retirement plan, the phase-out range will increase to between $230,000 and $240,000; and
• For married individuals filing separately, the phase-out range remains between $0 and $10,000.

It’s important to remember that if neither a taxpayer nor his or her spouse is covered by a workplace retirement plan, then the phase-outs and eventual elimination of the deduction won’t apply.

An Experienced Nationwide Tax & IRS Attorney 

If you have questions about the IRS’ 401(k) and IRA contribution limits, don’t hesitate to reach out to experienced CPA, former FBI Special Agent, and skilled Florida tax lawyer Ronald Cutler, P.A. for help. A member of our legal team is standing by to help you set up a free, one-on-one consultation at your earliest convenience. Please call us at 386-490-9949 to get started.

Sources: 

irs.gov/newsroom/401k-limit-increases-to-23000-for-2024-ira-limit-rises-to-7000

irs.gov/pub/irs-drop/n-23-75.pdf