The IRS has some good news for taxpayers who are looking to aggressively save for retirement.
Last week, the federal agency announced increases on limits for tax-exempt retirement accounts for tax year 2019.
The announcement covers maximum employee contribution limits for 401(k) plans, which are increasing to $19,000, up from $18,500 in the 2018 tax year.
The limits for similar retirement accounts, like 403(b), many 457 plans and the federal Thrift Savings Plan, also are going up to $19,000.
Also seeing a hike are limits on annual contributions to an IRA — $6,000 in the 2019 tax year, up from $5,500.
The increases stem from cost-of-living adjustments, the IRS said in a news release.
“This is always an exciting and welcomed change,” said Amy Peek, accountant and owner of Pittsburgh-based Peekz ConsultiN. “Typically, the IRS does increase the amount you can contribute every year or couple of years. The biggest celebration will come from the contribution increases to IRAs.”
An adjustment on limits for IRAs hasn’t taken place since 2013.
Peek recommends taxpayers check in with their financial advisers to see if they should take advantage of the new increases.
It’s important to see if increasing your contributions will yield tax savings.
“A married couple filing joint can defer taxes on as much as $38,000 just from maxing out their 401(k) contributions, but this will depend on the family’s overall tax plan,” she said.
For more information about the increases, visit the IRS website.
PHOTO CREDIT: investmentzen–Flickr–CC
Peekz ConsultiN LLC is a Pittsburgh-based accounting firm, located in the West Side, that caters to individuals, small businesses and nonprofit organizations. We aim to empower clients to help them take control of their finances and achieve their dreams.