Author: Denise M. Holmes, CPA | Partner
The Internal Revenue Code provides for dollar limitations on benefits and contributions to qualified retirement plans. IRC Section 415 requires the limits to be adjusted annually for cost-of-living increases. The IRS announced on October 31, 2013, cost of living adjustments applicable to dollar limitations for pension plans and other items for tax year 2014.
- The IRA contribution limit is $5,500 for 2014 (no change from 2013). This applies to all types of IRAs.
- The IRA Catch-Up contribution is $1,000 (no change from 2013). This applies to taxpayers age 50 or over.
- The deduction for taxpayers making contributions to a traditional IRA (deductible IRA) is phased out for single persons and heads of household who are covered by an employer-sponsored retirement plan and have modified adjusted gross incomes (AGI) between $60,000 and $70,000. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by an employer-sponsored retirement plan, the phase-out range is $96,000 to $116,000. For an IRA contributor who is not covered by an employer-sponsored retirement plan and is married to someone who is covered, the deduction is phased out if the couple's modified AGI is between $181,000 and $191,000. For a married individual filing a separate return who is covered by a retirement plan, the phase-out range remains $0 to $10,000; it is not subject to a cost-of-living adjustment.
- The modified AGI phase-out range for taxpayers making contributions to a Roth IRA is $181,000 to $191,000 for married couples filing jointly. For single persons and heads of household, the income phase-out range is $114,000 to $129,000. For a married individual filing a separate return who is covered by a retirement plan, the phase-out range remains $0 to $10,000; it is not subject to a cost-of-living adjustment.
Other Benefits-Related Limits
Health Savings Accounts (HSAs). The 2014 annual deduction limit for contributions to an HSA for an individual with self-only coverage under a high-deductible health plan (HDHP) will be $3,300. For an individual with family coverage under an HDHP, the limit will be $6,550. An HDHP will need to have an annual deductible that is not less than $1,250 for self-only coverage or $2,500 for family coverage, no change from 2013. In addition, the annual-out-of-pocket expenses (deductibles, copayments, and other amounts, but not premiums) may not exceed $6,350 for self-only coverage or $12,700 for family coverage. Individuals age 55 and older who are covered by an HDHP can make additional “catch-up” contributions each year until they enroll in Medicare. By statute, the catch-up contribution limit for individuals who will attain age 55 or older in the 2014 taxable year will remain at $1,000.
- Transportation Fringe Benefits. For taxable years beginning in 2014, the monthly limit for the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass will be $130, a decrease from the $240 limit for 2013, and the fringe benefit exclusion amount for qualified parking will be $250, an increase from the $245 limit for 2013. The 2014 limit reflects the expiration of the modifications to Section 132(f)(2) of the Internal Revenue Code by the American Taxpayer Relief Act.
- Long-Term Care Insurance Premiums. Long-term care insurance premiums qualify as deductible “medical care” costs up to certain limits for a taxable year. The applicable inflation-adjusted limits for 2014 are:
|Age Attained Before End of Taxable Year||Deductible Premium Limit|
|40 or Less||$370|
|More than 40 but not more than 50||$700|
|More than 50 but not more than 60||$1,400|
|More than 60 but not more than 70||$3,720|
|More than 70||$4,660|
Social Security Tax Wage Base
In addition to the above adjustments, the Social Security Administration has announced an increase in the wage base for Social Security taxes to $117,000 in 2014 (up from $113,700 in 2013).
Pension Plan Limits for 2014
Some pension limitations, such as elective deferral contributions and catch-up contributions for 401(k), 403 (b), and 457(b) plans, will remain unchanged. These limitations are adjusted by reference to Section 415(d) of the Internal Revenue Code, and the increase in the Consumer Price Index (1.5%) did not meet the statutory thresholds that trigger their adjustment. The 2014 limits are listed below.
|IRA Contribution Limit||$5,500|
|IRA Catch-up Contributions||$1,000|
|IRA AGI Deduction Phase-Out Starting At Joint Return||$96,000|
|Single or Head of Household||$60,000|
|SEP Minimum Compensation||$550|
|SEP Maximum Compensation||$260,000|
|SIMPLE Maximum Contributions||$12,000|
|401(k), 403(b), Profit Sharing Plans, etc: Annual Compensation||$260,000|
|Defined Contribution Limits||$52,000|
|Defined Benefits Limit||$210,000|
|457 Elective Deferrals||$17,500|
|Control Employee (board member or officer)||$105,000|
|Control Employee (compensation-based)||$210,000|
|Taxable Wage Base||$117,000|
Prior year limits and thresholds are published on the IRS website.
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