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IRS announces 2018 pension contribution limits under tax reform act

By Sally P. Schreiber, J.D.

Please note: This item is from our archives and was published in 2018. It is provided for historical reference. The content may be out of date and links may no longer function.

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The IRS announced that the 2018 dollar limitations on retirement plan contributions, outlined in IR-2017-177 and Notice 2017-64, were unchanged by P.L. 115-97, known as the Tax Cuts and Jobs Act (IR-2018-19). Although the new law made changes to the method of calculating cost-of-living increases, after applying the new methods, the contribution limits are unchanged from the ones announced in 2017.

Therefore, the limit on elective deferral for contributions to Sec. 401(k) plans, Sec. 403(b) plans, most Sec. 457 plans, and the federal government’s Thrift Savings Plan increased from $18,000 in 2017 to $18,500 for 2018. However, the catch-up contribution limit for those 50 and older remains $6,000. Most other inflation-adjusted amounts related to pensions increased from 2017 to 2018.

The ability of taxpayers who are covered by workplace retirement plans to make a deductible individual retirement arrangement (IRA) contribution is phased out for singles and heads of household who have modified adjusted gross incomes (AGIs) between $63,000 and $73,000, a slight increase from last year.

For married couples filing jointly, where the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phaseout range is $101,000 to $121,000 for 2018. These amounts also increased slightly from 2017. When an IRA contributor is not covered by a workplace retirement plan but is married to someone who is, the deduction is phased out if the couple’s income is between $189,000 and $199,000, also an increase from 2017.

For taxpayers making contributions to Roth IRAs, the phaseout range for determining the maximum contribution is $189,000 to $199,000 for married couples filing jointly and $120,000 to $135,000 for singles and heads of household. These limits were all increased from 2017.

The AGI limit for the saver’s credit is $63,000 for married couples filing jointly, $47,250 for heads of household, and $31,500 for single taxpayers and for married individuals filing separately, all increases from 2017.

— Sally P. Schreiber (Sally.Schreiber@aicpa-cima.com) is a Tax Adviser senior editor.