Contribution Limits for US Taxpayers in 2017
IRS already announced the figures related to tax ranges and limitations for US expat pension plan holders for 2017.
Overall, the ranges increased for eligibility determination including traditional IRAs (Individual Retirement Arrangements contribution deductibles, saver’s credit claiming, and Roth IRAs contributions. Only the contribution limits for the self-employed with SIMPLE pension accounts does not change.
These tax breaks from Congress seem to encourage more taxpayers to save for retirement. There are even changes in “cost-of-living” index to give extra savings options.
US expat taxpayers can take advantage of these changes especially those nearing the retirement years. Here are the details of these updated figures.
Taxpayers who contribute to a Roth IRA would benefit from the slight increase of income range. From the earlier $117,000 to $132,000 the new income range now sits between $118,000 to $133,000. This is for household heads and single individuals. Married couples who file jointly will also notice the increase in the range of $186,000 to $196,000 from the former range of $184,000 to $194,000. For a married individual who files a separate tax return, adjustments to your Roth IRA stays at $0 to $10,000. This is because Roth IRA for married individual filers is not under any yearly cost-of-living adjustments.
There are certain conditions to meet if the US expat taxpayer wants to deduct tax contributions through in a traditional IRA. Take note that a retirement plan which is available to you in your employment during the year may incur some changes. The deductions may lessen or phase out for either the taxpayer or his/her spouse. The conditions depend on filing status and income.
If there is no retirement plan that will cover either the taxpayer of his/her spouse at work, the deduction phase-outs are not applicable.
Traditional IRA updated ranges for 2017 are the following:
- If you are not covered by a workplace retirement plan but your spouse is, you get a deduction phase out which is now within the income range of $186,000 to $196,000. This is an increase from the earlier $184,000 to $194,000 coverage.
- Married couple filing jointly and one who makes the IRA contribution is under a workplace retirement plan will be under the new phase-out range of $99,000 to $119,000, revised from the previous $98,000 to $118,000.
- Married taxpayers who file a separate return and has workplace pension plan coverage will have a phase-out range of $0 – $10,000. The range is not under a yearly cost-of-living adjustment to it remains in that range.
- Single US taxpayers who benefit from a retirement plan at work will now have a phase-out range of $62,000 to $72,000, up from the usual $61,000 to $71,000.
The retirement savings credit for tax contributions (otherwise known as the saver’s credit) is available for low or moderate-income earners. The updated figures are as follows:
- Married couples filing jointly before had a credit value of $61,500. The new credit value is now at $62,000.
- Heads of the household will now have saver’s credit of $46,500, up from the previous $46,125.
- Singles and married taxpayers filing separately will benefit from the new credit amount of $31,000, an increase from the usual $30,750.
The same limit in 2016 is applicable for 2017. The retirement account range stays at $12,500 while the catch-up limit remains at $3,000.
The SIMPLE IRA’s title is to get away from the idea of confusing rules, terms, and other complexities related to pension plan holders. The SIMPLE IRA is ideal for the self-employed, for dual-earning couples, and for simple businesses who want to save retirement aids for their employees.
Traditional IRA or Roth IRA will allow you to contribute $5,500. SIMPLE IRA allows higher contribution, up to $12,000 or, if you are 50 years old or older, up to $14,500. For employers, up to 3% of your net income from self-employment can also be put up. Meaning, if you make $100,000, another $3,000 employer match is possible. This match is available for your spouse or any deserving employee who earns at least $5,000 annually.
Aside from the SIMPLE, there are other contributions with no changes for 2017. These include the following:
Employees who have contributions to 401 (K), 403(B), 457 plans or the federal government’s Thrift Savings Plan will still enjoy the same contribution limit of $18,000. Take note, however, that you can make changes anytime during the year to your 401(K) choices. You don’t have to wait for enrollment season and the employer’s notice to update your plan for the following year.
401(K) Catch Up
For employees age 50 or up also have the same contribution limit for this year – at $6,000. You can still make the catch-up contribution for the year even if you don’t reach the age of 50 until 31st of December. There is also an option to frontload your 401(K) catch up contributions.
After-tax 401(K) Contributions
An employee who can avail of an after-tax contribution, as set by his employer, will benefit from the revised limit of $54,000. It includes your pre-tax or Roth valued at $18,000 salary deferrals and any contributions made by the employer (not including catch-up contributions).
Adjusted Cost-of-Living Limits for 2017
Starting January 1, 2017, limitation on a yearly benefit under a specific plan under § 415(b)(1)(A) increases from $210,000 to $215,000.
If your employment ends before January 1, the computations for your limitation under § 415(b)(1)(B) benefit plan is the product of your compensation limit through 2016 and 1.0112.
Plans under § 415(c)(1)(A) also increases in 2017. From $53,000, it is up to $54,000.
IRS Code also provides the following changes:
“The adjusted gross income limitation under § 25B(b)(1)(A) for determining the retirement savings contributions credit for married taxpayers filing a joint return remains unchanged at $37,000; the limitation under § 25B(b)(1)(B) remains unchanged at $40,000; and the limitation under §§ 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $61,500 to $62,000.
Check with your tax advisor for more information and for advice on necessary changes or steps to do related to this adjusted figures.