Each year, the IRS’ rules about retirement changes. For 2017, the changes aren’t drastic, but are worth noting. Here’s an overview:
1. Higher income limits on defined contribution plans
“Traditional IRAs … can provide an ancillary benefit of lowering current-year tax liability,” wrote Sean Williams for the Motley Fool. “In 2017, the phase-out range for taking this deduction increases $1,000 to $62,000 to $72,000 for single taxpayers.”
For those investing in both traditional IRAs and 401(k)s in 2017, “the ability to make a tax-deductible contribution to an IRA when you also have a 401(k) at work is phased out for individuals earning $62,000 to $72,000 ($99,000 to $119,000 for couples), up $1,000 from 2016,” wrote Emily Brandon for U.S. News and World Report. And for those who don’t have a 401(k), but have a spouse who does, “the tax deduction is phased out if the couple’s income is $186,000 to $196,000,” wrote Brandon.
2. Some changes for Social Security participants
Brandon noted that those receiving Social Security will see a 0.3 percent cost-of-living adjustment beginning in January. Employees typically contribute 6.2 percent of their income into Social Security, an amount matched by their employers, until the employee reaches the taxable maximum. “The amount of earnings subject to Social Security taxes will increase from $118,500 in 2016 to $127,200 in 2017,” Brandon added, “this is expected to result in 12 million workers paying more into the Social Security system.”
3. Income limit for saver’s credit increases
The income limit for the saver’s credit, which offers incentives for low-earning individuals who save money, will increase slightly, Brandon wrote. “Workers earning less than $31,000 in 2017 ($62,000 for couples) could qualify for this tax credit,” stated Brandon. “It’s worth between 10 and 50 percent of 401(k) and IRA contributions up to $2,000 for individuals and $4,000 for couples.”