IRS Changes Allow for More Retirement Savings and Tax Deductions

 Posted on November 15,2018 in Taxation Law

If you are one of the millions of Americans who is saving for retirement, the IRS recently announced some good news for you. Starting in 2019, you can contribute more money to certain retirement accounts, including IRAs, 401(k)s, 403(b)s, most 457 plans, and the Thrift Savings Plan for federal workers. These changes will allow many people to save more money for retirement, and more tax deductions will be available.

Changes to Contribution Limits and Deductions

With this change, the IRS has increased the annual IRA contribution limit for the first time since 2013. The IRS also announced rules that make it easier to qualify for a Roth IRA as well as to deduct contributions to a traditional IRA. The changes include:

• With respect to the contribution limits to IRAs and Roth IRAs, the limit in 2019 is $6,000. That is a $500 increase from years prior.
• An extra $500 can be contributed to 401(k)s, 403(b)s, most 457 plans, and Thrift Savings Plans. The new limit is $19,000 in 2019.

Starting in 2019, more people will be eligible for Roth IRAs. These IRAs have the distinct advantage of tax-free distributions during retirement. Only those under certain income levels qualify for a Roth IRA.

Under the new rules, also effective in 2019, the income phase-out range for those contributing to a Roth IRA is $122,000 to $137,000 for single taxpayers and heads of household. Prior to the announcement, this range was between $120,000 and $135,000. The income phase-out range for married couples who file taxes jointly is now $193,000 to $203,000. Prior to the announcement, this range was between $189,000 and $199,000. 

One area in which the contribution amounts have not changed is catch-up contributions. For those who are 50 years old or over, IRS rules allow for increases in contributions. Catch-up contribution limits are still $1,000 more per year for traditional or Roth IRAs and $6,000 more for a 401(k), 403(b), most 457 plans, and the Thrift Savings Plan.

Contact a San Jose, CA Tax Lawyer

If you have questions about how to save for retirement and take advantage of such savings on your taxes, our skilled San Jose tax law attorney can be of help. Adequately saving for retirement is critical, and it can be financially difficult to max out your saving plans every year. However, with proper planning, you can reduce your tax liability, which can help you meet your savings goals. Call our firm today at 408-866-1810 to set up a meeting with our tax attorney to discuss your retirement savings strategy.

Sources:

https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19000-for-2019-ira-limit-increases-to-6000