Good news: Key tax parameters for qualified retirement plans and IRAs are up in 2024!

Alert: The IRS announced 2024 cost-ofliving adjustments (COLAs) for plans and IRAs late last year. (IR-2023-203, 11/1/23) Most of the numbers were bumped up from 2023. For instance, you can kick in as much as $23,500 to a 401(k) plan in 2024 instead of $23,000.

Here are changes you may be interested in.

Plan contribution limits: The salary-reduction contribution limit for employees who participate in 401(k), 403(b) and most 457 plans, as well as the federal government’s Thrift Savings Plan, is increased to $23,000, up from $22,500.

IRA contribution limits: The limit on annual contributions to an IRA increased to $7,000, up from $6,500. The IRA catchup contribution limit for individuals aged 50 and over remains at $1,000 (see box).

Plan catch-up contribution limits: The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b) and most 457 plans, as well as the federal government’s Thrift Savings Plan, remains $7,500 for 2024. Therefore, participants in 401(k), 403(b) and most 457 plans, as well as the Thrift Savings Plan, who are 50 and older can make 2024 salary-reduction contributions of up to $30,500 ($23,000 + $7,500). The catch-up contribution limit for employees 50 and over who participate in SIMPLE plans remains $3,500 for 2024.

Phase-out rules for IRAs: The income ranges for determining eligibility to make annual deductible contributions to traditional IRAs and annual nondeductible contributions to Roth IRAs, plus the thresholds for claiming the retirement saver’s credit, all increased for 2024.

Note: Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If, during the year, either the taxpayer or their spouse or both are covered by a tax-favored retirement plan at work or by a self-employed plan, the deduction may be partially or completely phased out, depending on filing status and modified adjusted gross income (MAGI). If neither the taxpayer nor the spouse is covered by a retirement plan at work or by a self-employed plan, the phase-out rules do not apply.

Here are the phaseout ranges for 2024. For single taxpayers covered by a tax-favored retirement plan, the phase-out range is increasedto $77,000–$87,000, up from $73,000–$83,000. For married couples filing jointly, if the spouse making the IRA contribution is covered by a retirement plan, the phase-out range is increased to $123,000–$143,000, up from $116,000– $136,000. For IRA contributors not covered by a retirement plan and married to someone covered, the phase-out range is increased to $230,000– $240,000, up from $218,000–$228,000. For a married individual filing a separate return covered by a workplace retirement plan, the phase-out range is not subject to an annual costof-living adjustment and remains $0–$10,000. The MAGI phase-out range for taxpayers making contributions to a Roth IRA is increased to $146,000–$161,000 for singles and heads of household, up from $138,000–$153,000. For married couples filing jointly, the income phaseout range is increased to $230,000–$240,000, up from $218,000–228,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0–$10,000. The income limits for the retirement saver’s credit (also known as the retirement savings contributions credit) for certain low-to-moderate-income workers are $76,500 for married couples filing jointly, up from $73,000; $57,375 for heads of household, up from $54,750; and $38,250 for singles and married individuals filing separately, up from $36,500. The amount individuals can contribute to SIMPLE retirement accounts is increased to $16,000, up from $15,500.

Tip: The IRS published the 2024 COLAs in Notice 2023-75, found at www.irs.gov/pub/ irs-drop/n-23-75.pdf.