The Internal Revenue Service (IRS) announced this week that taxpayers will be able to put more into their retirement savings next year.
For 2024, contribution limits for employees who participate in 401(k), 403(b), and most 457 plans, along with the federal government’s Thrift Savings Plan is increased from $22,500 to $23,000, and limits on annual individual retirement accounts (IRA) contributions to increased from $6,500 to $7,000, according to an IRS notice published Wednesday.
However, the IRS kept the IRA catch‑up contribution limit at $1,000 for individuals aged 50 and over despite and amendment under the SECURE 2.0 Act of 2022 (SECURE 2.0) to include an annual cost‑of‑living adjustment.
Additionally, the catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the Thrift Savings Plan remains $7,500 for 2024, according to the IRS.
Coupled with typical contributions, participants in those programs who are 50 and older can contribute up to $30,500, starting in 2024, according to the IRS.
The agency did make higher adjustments for the income ranges that determine eligibility for deductible contributions to traditional IRAs, to contribute to Roth IRAs, and to claim the Saver’s Credit.
Taxpayers can deduct contributions to their traditional IRA if they meet certain conditions. If during the year either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income.
- For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to between $77,000 and $87,000, up from between $73,000 and $83,000.
- For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to between $123,000 and $143,000, up from between $116,000 and $136,000.
- For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to between $230,000 and $240,000, up from between $218,000 and $228,000.
- For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.
Income limits for the Saver’s Credit, also known as the Retirement Savings Contributions Credit, for low- and moderate-income workers also went up
For married couples filing jointly, the number went up to $76,500 from $73,000. For heads of household, it went up to $57,375 from $54,750. For single or married individuals filing separately, it went up to $38,250 from $36,500.
Additional changes made under SECURE 2.0 are as follows:
- The limitation on premiums paid with respect to a qualifying longevity annuity contract to $200,000. For 2024, this limitation remains $200,000.
- Added an adjustment to the deductible limit on charitable distributions. For 2024, this limitation is increased to $105,000, up from $100,000.
- Added a deductible limit for a one-time election to treat a distribution from an individual retirement account made directly by the trustee to a split-interest entity. For 2024, this limitation is increased to $53,000, up from $50,000.
