by Denise Appleby CISP, CRC, CRPS, CRSP, APA
The IRS issued Revenue Procedure 2007-66 and IR-2007-171, in which they provide plan limits for 2008. The following are the highlights.
Savers Credit
A nonrefundable savers tax credit is available to eligible individuals who make contributions to their retirement account/s. The saver’s credit is capped at $1,000, and the percentage for which the individual is eligible depends on his/her modified adjusted gross income (MAGI). The following are the MAGI limits and the credit percentage for which individuals are eligible.
|
2007 Thresholds |
||||||
|
Credit Rate |
Married and files a joint return |
Files as head of household |
Other category of filers |
|||
|
Over |
Not Over |
Over |
Not Over |
Over |
Not Over |
|
|
50% |
$0.00 |
$31,000 |
$0.00 |
$23,250 |
$0.00 |
$15,500 |
|
20% |
$31,000 |
$34,000 |
$23,250 |
$25,500 |
$15,500 |
$17,000 |
|
10% |
$34,000 |
$52,000 |
$25,500 |
$39,000 |
$17,000 |
$26,000 |
|
0% |
$52,000 |
$39,000 |
$26,000 |
|||
|
2008 Thresholds |
||||||
|
Credit Rate |
Married and files a joint return |
Files as head of household |
Other category of filers |
|||
|
Over |
Not Over |
Over |
Not Over |
Over |
Not Over |
|
|
50% |
$0.00 |
$32,000 |
$0.00 |
$24,000 |
$0.00 |
$16,000 |
|
20% |
$32,000 |
$34,500 |
$24,000 |
$25,875 |
$16,000 |
$17,250 |
|
10% |
$34,500 |
$53,000 |
$25,875 |
$39,750 |
$17,250 |
$26,500 |
|
0% |
$53,000 |
$39,750 |
$26,500 |
|||
For an explanation of the saver’s credit, see The Saver’s Credit- an Often Overlooked Retirement Savings Benefit:
Roth IRA Contributions
Individuals may contribute to a Roth IRA only if their MAGI amounts do not exceed certain limits .The limits are as follows:
|
Tax Filing Status |
2007 MAGI |
2008 MAGI |
Allowed contribution |
|
Single |
$99,000 or less |
$101,000 or less |
100% |
|
$99,000 – $114,000 |
$101,000 – $116,000 |
Partial |
|
|
$114,000 or more |
$116,000 |
None |
|
|
Married filing jointly |
$156,000 or less |
$159,000 or less |
100% |
|
$156,000 -$166,000 |
$159,000 – $169,000 |
Partial |
|
|
$166,000 or more |
$169,000 or more |
None |
|
|
Married filing separately |
Less than $10,000 |
Less than $10,000 |
Partial |
|
$10,000 or more |
$10,000 or more |
None |
Traditional IRA Deductibility
Individuals who are active participants are eligible to deduct their traditional IRA contributions, only if their MAGI amounts do not exceed certain limits. The MAGI that applies to each tax-filing status is as follows:
|
Tax Filing Status |
2007 MAGI |
2008 MAGI |
Allowed deduction |
|
Single |
$52,000 or less |
$53,000 or less |
100% |
|
$52,000 – $62,000 |
$53,000 – $63,000 |
Partial |
|
|
$62,000 or more |
$63,000 or more |
None |
|
|
Married filing jointly and active |
$83,000 or less |
$85,000 or less |
100% |
|
$83,000- $103,000 |
$85,000 – $105,000 |
Partial |
|
|
$103,000 or more |
$105,000 or more |
None |
|
|
Married filing jointly. Not active, but spouse is active |
$156,000 or less |
$159,000 or less |
100% |
|
$156,000 – $166,000 |
$159,000-$169,000 |
Partial |
|
|
$166,000 or more |
$169,000 or more |
None |
|
|
Married filing separately |
Less than $10,000 |
Less than $10,000 |
Partial |
|
$10,000 or more |
$10,000 or more |
The following limits were also announced.
|
Item |
2007 Limit |
2008 Limit |
Comments |
|
Salary deferral contributions to plans such as 401(k), thrift, or 403(b). |
$15,500 |
$15,500 |
Maximum amount of salary deferral contributions that can be made by an individual for the year. This is a ‘per individual’ limit. Therefore, regardless of the number of 401(k), thrift, SIMPLE IRA, SIMPLE 401(k) or 403(b) plans in which the individual participates, the aggregate salary deferral contributions for the year cannot exceed $15,500 + catch-up contributions. |
|
Salary deferral contributions to 457(b) plans |
$15,500 |
$15,500 |
Maximum amount of salary deferral contribution that can be made to a 457(b) plan. If someone participates in a 457(b) plan and also participates in a 403(b) plan [for example], he/she could make salary deferral contributions of up to $15,500 to each (total $31,000) + catch-up contributions. |
|
SIMPLE IRA Salary deferral |
$10,500 |
$10,500 |
Maximum amount of salary deferral contributions that can be made to a SIMPLE IRA for the year |
|
SIMPLE 401(k) Salary deferral |
$10,500 |
$10,500 |
Maximum amount of salary deferral contributions that can be made to a SIMPLE 401(k) for the year |
|
Catch-up contribution to 401(k) and 403(b) plans |
$5,000 |
$5,000 |
Maximum amount of catch-up contributions that can be made for the year. This does not include catch-up contributions made to 457(b) plans |
|
Catch-up contribution to 457(b) plans |
$5,000 |
$5,000 |
Maximum amount of catch-up contributions that can be made to a 457(b) plan. |
|
Catch-up contribution limit for SIMPLE IRAs |
$2,500 |
$2,500 |
Maximum amount of catch-up contributions that can be made to a SIMPLE IRA for the year |
|
Catch-up contribution limit for SIMPLE 401(k) plans |
$2,500 |
$2,500 |
Maximum amount of catch-up contributions that can be made to a SIMPLE 401(k) for the year |
|
Annual addition dollar limit for defined contribution plans |
$45,000 |
$46,000 |
Maximum dollar amount that can be added to a participant’s account for the year. This applies on a per-employer basis. Therefore, if an individual works for two separate employers, that individual could receive $46,000 to each plan (total $92,000) + catch-up for 2008. For this to be possible, the employers must not be part of a controlled group or affiliated service group. |
|
Annual benefit dollar limit for defined benefit plans |
$180,000 |
$185,000 |
Maximum benefit payable annually in the form of a straight life annuity under a defined benefit plan |
|
Compensation cap |
$225,000 |
$230,000 |
The maximum amount of compensation that can be taken into account when computing plan contributions and benefits. For SIMPLE IRAs, this cap applies only to non-elective contributions. |
|
Minimum SEP compensation |
$500 |
$500 |
Employees who earn at least $500 must share in SEP contributions for the year, providing they meet the other eligibility requirements |
|
Dollar limitation for defining a key employee |
$145,000 |
$150,000 |
A plan is considered to be top-heavy if more than 60% of assets under the plan are owned by key-employees |
|
Dollar limitation for defining highly compensated employee (HCE) |
$100,000 |
$105,000 |
Nondiscrimination testing is required to be performed for qualified plans to ensure benefits are not discriminately skewed in favor of highly compensated employees |
Contribution limits for traditional and Roth IRAs were already addressed under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). The limits for 2008 are as follows
|
IRA Contribution Limit |
IRA Catch-up Contribution Limit |
|
$5,000 |
$1,000 |
For 2008 Social Security Changes , click here
