The Internal Revenue Service has passed along an early Christmas present of sorts to many taxpayers by increasing the maximum contribution amounts for 401(k) plans in 2024.
The contribution hike covers those employees who take part in 401(k), 403(b), or most 457 plans. Participants in the federal Thrift Savings Plan are also included in the increase. Taxpayers who participate in any of these plans can now contribute up to $23,000 for 2024; that’s up from $22,500 under the previous rules. Catch-up contribution limits for these same taxpayers, however, stay at present levels.
For those with SIMPLE retirement accounts, contribution limits have been raised from $15,500 to $16,000.
The new rules also boost the limit on contributions to an IRA, raising the bar from $6,500 to $7,000. Despite legislation including an annual cost-of-living adjustment (via the SECURE 2.0 Act of 2022), IRA 2024 catch-up contribution limits remain at $1,000 for those participants 50 and over.
Income Limits on Deduction Eligibility Increased.
A taxpayer’s eligibility to deduct their contributions to traditional IRAs or Roth IRAs, or to claim the Saver’s Credit can hinge on the filer’s income. In all three instances, these income ranges were increased by the IRS as well.
Deduction phase-out for traditional IRAs gets an overhaul from the new guidance. Affected taxpayers include Single covered by a retirement plan at work, and Married filing jointly with the spouse making the IRA contribution covered by a workplace retirement plan.
Complete details on these and deduction phase-outs – including those for Roth and SIMPLE plans, and the Saver’s Credit – are available in Notice 2023-75 on the IRS website. The Notice has technical guidance on all the cost-of-living adjustments set in motion by the SECURE Act 2.0 legislation.
Source: 401(k) limit increases to $23,000 for 2024, IRA limit rises to $7,000