IRS COLA adjustment mean changes to deductions
By Paula Aven Gladych
Contribution limits for 401(k) plans and IRAs were unchanged, but the 1.5 percent cost-of-living adjustment announced by the IRS this week will change pension plan deductions for 2014.
The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have a modified adjusted gross income between $60,000 and $70,000, up from $59,000 and $69,000 in 2013.
For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $96,000 to $116,000, up from $95,000 to $115,000 in 2013.
For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $181,000 and $191,000, up from $178,000 and $188,000. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains zero to $10,000.
The adjusted gross income phase-out range for taxpayers making contributions to a Roth IRA is $181,000 to $191,000 for married couples filing jointly, up from $178,000 to $188,000 in 2013. For singles and heads of household, the income phase-out range is $114,000 to $129,000, up from $112,000 to $127,000. For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains zero to $10,000.
The adjusted gross income limit for the saver’s credit for low- and moderate-income workers is $60,000 for married couples filing jointly, up from $59,000 in 2013; $45,000 for heads of household, up from $44,250; and $30,000 for married individuals filing separately and for singles, up from $29,500.
Effective Jan. 1, the limitation on the annual benefit under a defined benefit plan will increase from $205,000 to $210,000. For a participant who separated from service before Jan. 1, 2014, the limitation for defined benefit plans is computed by multiplying the participant's compensation limitation, as adjusted through 2013, by 1.0155.
The limitation for defined contribution plans will increase in 2014 to $52,000.
Originally published on BenefitsPro.com