Washington, Nov 12 (SocialNews.XYZ) Americans will be able to contribute more to workplace retirement savings plans in 2027, with the annual employee contribution limit for 401(k) accounts rising by $1,000 to $25,500, the Internal Revenue Service announced on Thursday.
The increase also applies to 403(b) plans, governmental 457 plans and the federal government’s Thrift Savings Plan. The annual contribution ceiling for Individual Retirement Accounts, or IRAs, will remain unchanged at $7,500.
The adjustments concern contributions for the 2027 tax year. They do not change the limits applicable to 2026.
The IRS also increased the additional amount that most participants aged 50 and older can contribute to workplace plans. This general catch-up allowance will rise from $8,000 to $8,500.
Together with the standard employee limit, that will generally allow eligible participants aged 50 and older to contribute up to $34,000 in 2027.
A separate, higher catch-up allowance applies to employees aged 60, 61, 62 and 63. For those participants, the additional contribution limit will be $11,750, rather than the general $8,500 allowance.
The IRA catch-up contribution limit for people aged 50 and older will remain $1,100, the agency said.
“With the new adjustment in place now, the IRS is giving taxpayers and employers the information needed to make retirement planning decisions for the year ahead,” IRS Chief Executive Officer Frank J. Bisignano said.
The changes are relevant to eligible Indian-American workers and Indian professionals participating in US workplace retirement plans. They are general retirement-plan adjustments, rather than provisions specific to any nationality.
Alongside the contribution ceilings, the IRS increased income ranges used to determine eligibility for deductible traditional IRA contributions and Roth IRA contributions.
For single taxpayers covered by a workplace retirement plan, the income range over which a traditional IRA deduction phases out will rise to $83,000–$93,000, from $81,000–$91,000 in 2026.
For married couples filing jointly, where the spouse making the contribution is covered by a workplace plan, the range will increase to $133,000–$153,000, from $129,000–$149,000.
Where the contributor is not covered by a workplace retirement plan, but their spouse is, the joint-filing phase-out range will rise to $250,000–$260,000.
The IRS said the deduction phase-outs do not apply if neither the taxpayer nor their spouse is covered by a retirement plan at work.
Source: IANS
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