By Brent Taylor, CPA
As 2010 is quickly coming to a close, it’s never too early to start tax planning for the coming 2011 tax year. A good place to start is with your retirement investment strategy, and the Internal Revenue Service has recently announced its 2011 tax year cost of living adjustments affecting dollar limitations for retirement-related items. In general, these limits will either remain unchanged, or the inflation adjustments for 2011 will be small.
According to the Internal Revenue Service, for 2011, the maximum annual contribution an individual under age 50 can make to a 401(k) plan will stay put at $16,500.
The catch-up contribution limit for those 50 and over also remains unchanged at $5,500.
Total contributions to the tax-deferred retirement plans, including employer matching contributions, will remain unchanged at a maximum of $49,000.
It will be the third straight year without an adjustment for inflation, which is generally based on the consumer price index. The contribution maximum has risen annually in all but six years since inflation adjustments began at the end of 1987.
The annual maximums also apply to 403(b) plans for education and nonprofit workers, 457(b) plans for state and local government employees and the Thrift Savings Plan for federal-government employees.
Finally, The Adjusted Gross Income phase-out range for taxpayers making contributions to a Roth IRA is $169,000 to 179,000 for married couples filing jointly, up from $167,000 to $177,000 in 2010. For singles and heads of household, the income phase-out range is $107,000 to $122,000, up from $105,000 to $120,000.
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