December 21, 2012
Benjamin Franklin once declared, "Nothing can be said to be certain, except death and taxes." Although I don't have any updates on the former, where taxes are concerned I do have news:
As it does every year, the Internal Revenue Service announced 2013 cost-of-living adjustments to many of the amounts you and your employer can contribute toward your retirement accounts. These new limits mean most people will be able to contribute more money in tax-advantaged accounts for their retirement savings.
Here are highlights of what will and won't change in 2013:
Defined contribution plans. The maximum allowable annual contribution you can make to workplace 401(k), 403(b), 457(b) and federal Thrift Savings plans increases by $500 to $17,500. Keep in mind these additional factors:
Individual Retirement Accounts (IRAs). The maximum annual contribution to IRAs increases by $500 to $5,500 (plus an additional $1,000 if 50 or older – unchanged from 2012). Maximum contributions to traditional IRAs are not impacted by personal income, but if your modified adjusted gross income (AGI) exceeds certain limits, the maximum amount you can contribute to a Roth IRA gradually phases out:
Keep in mind these rules for deducting traditional IRA contributions on your federal tax return:
Retirement Saver' Tax Credit: As an incentive to help low- and moderate-income workers save for retirement through an IRA or company-sponsored plan, many are eligible for a Retirement Savers' Tax Credit of up to $1,000 ($2,000 if filing jointly). This credit lowers your tax bill, dollar for dollar, in addition to any other tax deduction you already receive for your contribution.
Qualifying income ceiling limits for the Retirement Savers' Tax Credit increased in 2012 to $59,000 for joint filers, $44,250 for heads of household, and $29,500 for singles or married persons filing separately. Consult IRS Form 8880 for more information.
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