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IRS Announces 2019 IRA Contribution Limits

We’ll see an increase for the first time since 2013.

The Internal Revenue Service just announced the cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for 2019 (Notice 2018-83).  

Increased Limits

For the first time since 2013, the contribution limit for individual retirement accounts has increased, from the current $5,500 to $6,000 in 2019. For taxpayers aged 50 or over, the limit will be $7,000 after taking into consideration the $1,000 catch-up amount. The contribution limit for employees who participate in Internal Revenue Code Section 401(k), IRC Section 403(b), most IRC Section 457 plans and the Thrift Savings Plan is increased from $18,500 to $19,000. The catch-up contribution limit for employees aged 50 and over who participate in these plans will stay at $6,000. The limitation on the annual benefit under a defined benefit plan under IRC Section 415(b)(1)(A) will increase to $225,000 (up from $220,000), and the limitation for defined contribution plans under IRC Section 415(c)(1)(A) will increase to $56,000 (up from $55,000).

Income Phase-Out Range

In addition to the above limitation, the amount of a taxpayers’ adjusted gross income also affects how much they can contribute to a Roth IRA. The income phase-out range for taxpayers making Roth IRA contributions will be $122,000 to $137,000 for singles and heads of household (up from $120,000 to $135,000) and, for married couples filing jointly, the range is $193,000 to $203,000 (up from $189,000 to $199,000). For married taxpayers who file separate, the phase-out range remains at $0 to $10,000.

Company-Sponsored Plans

Income limitations also apply to deductible contributions to a traditional IRA when the taxpayer or the taxpayer’s spouse participates in a company-sponsored retirement plan. For single filers who are covered by a company retirement plan at work in 2019, the deduction will be phased out between $64,000 and $74,000 of AGI (up from $63,000 and $73,000). For married filers who are covered by a company retirement plan at work in 2019, the deduction will be phased out between $103,000 and $123,000 of AGI (up from $101,000 and $121,000). For married filers who aren’t covered by a company retirement plan at work in 2019 but whose spouse is, the deduction will be phased out between $193,000 and $203,000 of AGI (up from $189,000 and $199,000). For married taxpayers who file separate, the phase-out range remains at $0 to $10,000.

Saver’s Credit

The income limit for the Saver’s Credit for low- and moderate-income workers will be increased to $64,000 for married couples filing jointly, $48,000 for heads of household, and $32,000 for singles and married individuals filing separately.

SIMPLE IRA

A savings incentive match plan for employees IRA plan allows employees to use a percentage of their compensation to make elective salary-deferral contributions. For 2019, the amount an employee can contribute from his salary to such a plan can’t exceed $13,000 (up from $12,500). The plan can also allow catch-up contributions up to $3,000 for employees aged 50 or older.

SEPs

The compensation amount under IRC Section 408(k)(2)(C) regarding simplified employee pensions remains unchanged at $600.

Other Changes

Some other changes are as follows:

  • The annual compensation limit under IRC Sections 401(a)(17), 404(l), 408(k)(3)(C) and 408(k)(6)(D)(ii) is increased to $280,000 (up from $275,000).
  • The dollar limitation under IRC Section 416(i)(1)(A)(i) concerning the definition of “key employee” in a top-heavy plan is increased to $180,000 (up from $175,000).
  • The dollar amount under IRC Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5-year distribution period is increased to $1,130,000 (up from $1,105,000), while the dollar amount used to determine the lengthening of the 5-year distribution period is increased to $225,000 (up from $220,000).
  • The limitation used in the definition of “highly compensated employee” under IRC Section 414(q)(1)(B) will increase to $125,000 (up from $120,000).
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