2013 Pension Plan and Retirement Changes

The IRS announced today cost of living adjustments for dollar limitations for pension plans and retirement related items for 2013. Highlights for the most common plans include:

Elective deferrals for 401(k), 403(b), most 457 plans and the Federal Thrift Savings Plan is increased to $17,500. Catch-up contributions for age 50 and over remain unchanged at $5,500.

Traditional IRA contribution deductions for those covered by an employer retirement plan are phased out for singles and heads of household with modified adjusted gross income between $59,000 and $69,000; married couples filing jointly income phase out range is $95,000 to $115,000; Contributors not covered by an employer retirement plan and married to someone who is, has a phase out based on the couple’s income between $178,000 and $188,000.

Contributions to a Roth IRA has a phase out range for married couples of $178,000 to $188,000; singles and heads of household income phase out range is $112,000 to $127,000.

The Saver’s credit for low and moderate income workers AGI limit is $59,000 for married couples, $44,250 for heads of household and $29,500 for singles or married filing separately.

The limitation on the annual benefit under a defined benefit plan is increased to $205,000.

The limitation for defined contribution plans is increased to $51,000.

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

For the complete announcement covering all retirement plan changes, visit IRS.gov for Newswire release IR-2012-77.

Related articles

• IRS raises 401(k) contribution limit to $17,500 (money.cnn.com)

Medicare Premiums Are Insurance Deduction for Self-Employed

Recent News…the IRS Chief Counsel office released their decision to treat Medicare Premiums the same as health insurance premiums under section 162(1). This decision allows you to deduct the Medicare Premium in the same manner as deducting health insurance premiums. Any self-employed individuals who failed to deduct Medicare premiums in 2010 or 2011 may file an amended return to claim a refund, if within the statute of limitations.

Deduction of Medicare Premiums Office Of Chief Counsel Memo 071312

What’s Red, White and Blue?

Have you heard about the new tax form printed in red, white and blue? When you filled in the white, you’re left in the red, and that makes you blue! I know…I better keep my day job!

Seriously, if you want to reduce your tax liability, you have to act now. Tax Planning provides you opportunities to potentially increase your tax deductions and reduce your tax liability. Those opportunities are lost when you wait until time to file your tax return to think about taxes.

If you are worried about the cost for tax planning, don’t be. If you have a good tax consultant, they will often be able to offer opportunities for tax savings that will well exceed the cost of the tax planning. But that is only if you act NOW…half the year is over already. Everyday you wait is another day you lost money. Just do it!