Earlier in the week the IRS announced the adjustments to pension plan limitations in 2011, which will have an impact on a handful of retirement plans popular among American taxpayers. US News.com put together a list of the top five retirement tax breaks that will be affected by the IRS' recent announcement. You can find a few items from their list below, or the full text here.
401(k)s. The savings limits for employer-based retirement accounts are not increasing next year because inflation was too low to trigger an increase. The cost-of-living index used to calculate increases in 401(k) savings limits is currently greater than it was in 2009, but it is still less than the measurement for the third quarter of 2008. The maximum amount investors can contribute to 401(k)s will not be raised until the September inflation measurement climbs above where is was in 2008. Contribution limits cannot be reduced under current law.
Traditional IRAs. Certain income ceilings determine who is eligible for a tax break for contributing to an IRA. Individuals who have a retirement plan at work can contribute the full amount to an IRA until their modified adjusted gross income (AGI) reaches $56,000. The amount eligible for tax deferral is then gradually phased out until income reaches $66,000 in 2011, the same amount as this year. However, married couples filing jointly will get higher income limits next year. For a spouse who participates in a retirement plan at work the income phase-out range will be $90,000 to $110,000 in 2011, up from $89,000 to $109,000 this year. For IRA owners who do not have access to a retirement account at work, but are married to someone who does, the deduction will be phased out if the couple’s income is between $169,000 and $179,000, up from $167,000 and $177,000 this year.
Roth IRAs. More high income retirement savers will be eligible to make Roth IRA contributions next year. Married couples filing jointly can contribute to a Roth IRA until their AGI reaches between $169,000 and 179,000 next year, up from $167,000 to $177,000 in 2010. The AGI phase-out range for singles and heads of household will increase from $105,000 to $120,000 this year to between $107,000 and $122,000 in 2011.
Saver’s credit. The AGI limit to get the saver’s credit will be $56,500 for married couples filing jointly in 2011, up from $55,500 in 2010. For heads of household the income limit will increase from $41,625 this year to $42,375 in 2011. Single people and married individuals filing separately can earn up to $28,250 and still get the saver’s credit, up from $27,750 this year.