IRS Announces Changes on Key Tax Figures for 2018
Recently, the Internal Revenue Service announced annual inflation adjustments on a number of tax provisions, as well as the tax rate tables for Individuals and estates / trusts. The majority of these provisions are increasing for the tax year 2018, which show adjustments to pension plan limitations, FICA tax and estate / gift tax limits.
According to the IRS, the cost of living limitations for pension plans and other related retirement plans will be adjusted for the tax year 2018:
- 401(k) Plans – The IRS has stated that beginning in January, 401(k) contribution limits will increase by $500. This means that in 2018, employees who participate can put in as much as $18,500, which is up from $18,000 from 2017.
- Defined Contribution Limits – In 2017, the limitation for profit sharing plans was $54,000. For 2018, the amount you can contribute has increased by $1,000, bringing your limit to $55,000.
- Annual Compensation Limits – The annual compensation limit, on contributions your employer can match, has increased from $270,000 to $275,000 for 2018.
- Catch-Up Contribution Limit – According to the IRS, the dollar limitation for catch-up contributions related to individuals who are 50 or over, will remain at $6,000 for 2018.
The IRS also announced a small increase to the 2018 wage base subject to the 6.2% Social Security Tax, which will raise the amount from $127,200, to $128,000. What’s more, they stated that Social Security Benefits will rise 2% for individuals who collect, in addition to the 1.45% Medicare Tax having no wage cap.
Among the other increases, the estate and gift tax exemption per individual has increased for 2018. The exemption rises to $5.6 million per person, up from $5.49 million in 2017. The annual gift exclusion will also increase to $15,000 for 2018, up from $14,000 since 2013.
For additional information, contact a Buchbinder executive!
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