2015 Tax Changes for Retirement Plans

On October 23, 2014 the Internal Revenue Service announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2015.  Many of the pension plan limitations are changing due to an increase in the cost of living index, but some will remain unchanged. Some of the more significant changes include the following:

  • The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,500 to $18,000.
  • The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $5,500 to $6,000.
  • The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500.  The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
  • The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000, up from $60,000 and $70,000 in 2014.  For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $98,000 to $118,000, up from $96,000 to $116,000.  For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $183,000 and $193,000, up from $181,000 and $191,000.  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 $0 to $10,000.
  • The AGI phase-out range for taxpayers making contributions to a Roth IRA is $183,000 to $193,000 for married couples filing jointly, up from $181,000 to $191,000 in 2014.  For singles and heads of household, the income phase-out range is $116,000 to $131,000, up from $114,000 to $129,000.  For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
  • The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $61,000 for married couples filing jointly, up from $60,000 in 2014; $45,750 for heads of household, up from $45,000; and $30,500 for married individuals filing separately and for singles, up from $30,000.

Effective January 1, 2015, the limitation on the annual benefit under a defined benefit plan remains unchanged at $210,000.

The limitation on contributions for defined contribution plans is increased in 2015 from $52,000 to $53,000.

The limitation on the exclusion for elective deferrals is increased from $17,500 to $18,000.

The annual compensation limit taken into account for plan contributions is increased from $260,000 to $265,000.

The dollar limitation concerning the definition of key employee in a top-heavy plan remains unchanged at $170,000.

The limitation used in the definition of highly compensated employee is increased from $115,000 to $120,000.

The compensation amount regarding simplified employee pensions (SEPs) is increased from $550 to $600.

The limitation regarding SIMPLE retirement accounts is increased from $12,000 to $12,500.

The limitation on deferrals concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased from $17,500 to $18,000.

The applicable dollar amount for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) is increased from $96,000 to $98,000.  The applicable dollar amount for all other taxpayers (other than married taxpayers filing separate returns) is increased from $60,000 to $61,000.  The applicable dollar amount for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.  The applicable dollar amount for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $181,000 to $183,000.

The adjusted gross income limitation for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from $181,000 to $183,000.  The adjusted gross income limitation for all other taxpayers (other than married taxpayers filing separate returns) is increased from $114,000 to $116,000.  The applicable dollar amount for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.

PK Law tax attorneys can assist with year-end tax planning for both individuals and businesses as well as planning for taxes for the coming year.