The tax law may change how you save for retirement in 2018...for the better. The changes raise contribution level limits and can help workers with their savings plans. The Motley Fool mentions five new guidelines you should be aware of.
401(k) contribution limits. 401(k) annual contribution limits are going up to $18,500. Catch-up contributions for account holders 50 years of age or older will continue to be capped at $6,000 per year.
Roth IRA income limits. If your tax filing status is single or head of household, you’ll only be able to make a partial contribution based on where your income falls within an annual income range of $120,000 - $135,000. Taxpayers who are married and filing jointly, have a phaseout range of $189,000 - $199,000. Married taxpayers filing separately, have a range of $0 - $10,000. If your income is above your phaseout range, you can’t contribute to a Roth IRA at all, except through a backdoor contribution.
IRA deduction limits. Taxpayers who have an employer-sponsored retirement savings account may not be able to deduct contributions to their IRA from their taxable income. If this applies to you, your ability to deduct IRA contributions phases out over a determined income range. The phaseout range for single and head-of-households is increasing to $63,000 - $73,000. The phaseout range for married taxpayers filing jointly is now $101,000 - $121,000, if the contributing spouse is the one covered by an employer-sponsored plan, or $189,000 - $199,000, if the contributing spouse is not the one covered. Those married and filing separately will see their phaseout range remain unchanged at $0-$10,000.
Saver’s Credit income limits. The Saver’s Credit is a tax credit that applies to retirement savings contributions. To qualify for the credit, you need to be below certain income limits for the year. They’ve gone up to $63,000 for taxpayers who are married and filing jointly, $47,250 for heads of households and $31,500 for single and those married and filing separately.
HSA contribution limits. Contribution limits for HSAs are also increasing -- $3,450 per year for self-only HSAs and $6,900 for family coverage HSAs.