The IRS has increased the maximum pre-tax contribution limit for 401(k) and 403(b) retirement plans, most 457 plans and the federal government’s Thrift Savings Plan for 2012 from $16,500 to $17,000, up $500 from 2011, as a result of cost-of-living adjustments. Other limitations, such as the catch-up contribution limit of $5,500 for those aged 50 or over, remain unchanged.

The maximum amount of earnings subject to the Social Security tax will increase from $106,800 to $110,100. Of the 161 million workers who will pay Social Security taxes in 2012, approximately 10 million will pay higher taxes as a result of the increase in the taxable maximum.

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 who have modified adjusted gross incomes between $58,000 and $68,000, up from $56,000 and $66,000 in 2011.  For married couples filing jointly, in which the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $92,000 to $112,000, increased from $90,000 to $110,000. For an IRA contributor who is not covered by a workplace plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between  $173,000 and $183,000, up from $169,000 and $179,000.

The income phase-out range for taxpayers making contributions to a Roth IRA is $173,000 to $183,000 for married couples filing jointly, up from $169,000 and $179,000 in 2011.  For singles and heads of household, the income phase-out range is $110,000 to $125,000, up from $107,000 to $122,000. For a married individual filing separately who is covered by a retirement plan at work, the phase out range remains $0 to $10,000.

The income limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $57,000 for married couples filing jointly, up from $56,500 in 2011; $43,125 for heads of household, up from $42,375; and $28,750 for married individuals filing separately and singles, up from $28,250.

Click here for more details on the 2012 contribution limits.

Contact an MCB Tax Adviser for your tax and accounting needs at 703.218.3600 or at

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