IRS Announces 2024 Contribution Limits
Nov 03, 2023
The
new limits come with guidance on all the cost-of-living adjustments affecting
dollar limitations for pension plans and other retirement-related items for tax
year 2024.
The
Internal Revenue Service on Wednesday announced the annual contribution limits for qualified defined
contribution plans and individual retirement accounts for the 2024 tax year.
The annual contribution limit for workers
who participate in 401(k), 403(b) and most 457 plans, as well as the federal
government’s Thrift Savings Plan, will be increased to $23,000 from $22,500 in
2023. The annual IRA contribution will increase to $7,000 from $6,500.
DC plan contribution limits grow
in step with the inflation rate for the third quarter of this year, 3.2%,
rounded down to the nearest $500 increment.
Catch-up contributions for those
50 years and older in DC plans will remain at $7,500, adding up to a total
allowed annual contribution of $30,500 for qualifying DC plans.
The super catch-up contribution
provision in the SECURE 2.0 Act of 2022 will not take effect until 2025. When
it does, it will permit those aged from 60 through 63 to contribute the greater
of $10,000 or half the ordinary catch-up amount (currently $7,500), both of
which will be indexed to inflation starting in 2026.
The $1,000 catch-up contribution
for IRAs remains unchanged, allowing those aged 50 years and older to
contribute up to $8,000 annually. The IRA catch-up was pegged to inflation by
the SECURE 2.0 Act of 2022 but was not increased for 2024.
The income eligibility ranges for
IRAs and the Saver’s Credit likewise increased for 2024.
Traditional IRAs
For single taxpayers in a
workplace plan, the phase-out range for traditional IRAs will increase to between
$77,000 and $87,000 from between $73,000 and $83,000. For married couples, the
amount will increase to between $123,000 and $143,000, up from between $116,000
and $136,000.
For a traditional IRA contributor
not covered by a workplace retirement plan and married to someone who is
covered, the phase-out range will increase to between $230,000 and $240,000, up
from between $218,000 and $228,000.
For a married individual who is
covered by a workplace retirement plan and is filing a separate return, the phase-out
range is not subject to an annual cost-of-living adjustment and will remain
between $0 and $10,000.
Roth IRAs
The income phase-out range for
taxpayers making contributions to a Roth IRA will increase to between $146,000
and $161,000 for singles and heads of household, up from between $138,000 and
$153,000.
For married couples filing
jointly, the income phase-out range will increase to between $230,000 and
$240,000, up from between $218,000 and $228,000. The phase-out range for a
married individual filing a separate return who makes contributions to a Roth
IRA is not subject to an annual cost-of-living adjustment and will remain
between $0 and $10,000.
Saver’s Credit
The income limit for the Saver’s
Credit (also known as the Retirement Savings Contributions Credit) for low- and
moderate-income workers will be $76,500 for married couples filing jointly, up
from $73,000; $57,375 for heads of household, up from $54,750; and $38,250 for
singles and married individuals filing separately, up from $36,500.
The amount individuals can
contribute to their SIMPLE retirement accounts will be increased to $16,000, up
from $15,500.
The minimum threshold for
employees to qualify as a highly compensated employee will increase to $155,000
in 2024, up from $150,000.
Source: Plan Adviser