In October, the government typically announces various income limits and other adjustments for the upcoming year. These are based on the tax law as it presently exists and are inflation-adjusted; if Congress passes major tax reform before year end, some or all of this will change.
Social Security: Retiree benefits will rise by two percent. Workers will see Social Security taxes taken out of the first $128,700 in earnings, up from $127,200 in 2017.
401(k) Contributions: The maximum contribution will rise from $18,000 to $18,500 next year. For those aged 50 or above, the catch-up contribution remains at $6,000. Those workers can contribute a maximum of $24,500. This maximum is per employee, not per account. Thus, if you change jobs mid-year or your employer offers both a traditional and a Roth 401(k), your total contribution is limited to $18,500 or $24,500, depending on your age.
IRA Contributions: The contribution limits will not change next year: $5,500, plus a $1,000 catch-up contribution for workers aged 50 or more. Again, this is per person, not per account. The income levels at which you can deduct some or all of your traditional IRA contribution have also inched upwards. The income levels at which you can directly make Roth IRA contributions are not inflation adjusted; they remain the same.
Gift and Estate Tax: Next year, you can give $15,000 (up from $14,000) to as many different people as you like without having to file a federal gift tax return. Gifts above that amount require a return, but there is no tax due unless your total lifetime gifts, plus what you own at death, exceed $5.6 million -- a married couple can share a total estate tax exclusion of $11.2 million.
All of these limits come with detailed rules, exceptions, and exceptions to the exceptions. For most of us, knowing the general rule is sufficient. Point View stands ready to assist with more detailed questions.
Note: Claire E. Toth, JD, MLT, CFP™, is Vice President at Point View Wealth Management, Inc., a registered investment advisor at 382 Springfield Ave., Summit. Visit us at ptview.com. CNBC has twice named Point View to its list of the top 100 American fee-only wealth managers. See http://www.cnbc.com/id/101619698
Point View Wealth Management, Inc. works with families in Summit and beyond, providing customized portfolio management services and comprehensive financial planning, to develop and achieve their financial goals. We are independent and fee only. How can we help you? Contact David Dietze (firstname.lastname@example.org), Claire Toth (email@example.com), or John Petrides (firstname.lastname@example.org) or call (908) 598-1717 to learn how.