JD Miller CPA
The Trusted Financial Planner

Save more in your 401k, 403b or 457 plan and in your IRA or Roth IRA in 2018!

Beginning January 1, 2018, you can get a bigger tax deduction and save more in your 401k, 403b and 457 plan. The maximum amount you can save in your 401k, 403b and 457 plan has been increased.

For your 401k plan, your company can also save more for you in the company profit sharing plan.  It can be done in two ways:

  1. Matching some of your contributions to your 401k plan.
  2. Allocating a portion of the profit sharing plan contribution to your 401k plan account.

Either or both can give you more money to spend.  Both are not taxable to you until you withdraw your money to spend.  It’s like “found money”.  And what you earn on the money in your 401k plan account is not taxable to you until you withdraw your money to spend.

And, while you should continue saving as much as you can in your Roth IRA or your regular IRA each year, the maximum amounts that can be saved in these tax favored IRAs have not been increased. They stay the same for 2018.

401k, 403b and 457 plan contributions

For all three plans, the 401k, 403b and the 457 plans, there are two maximum annual contribution amounts.  These include the maximum annual contribution amount for all IRA owners and the additional contribution amount for those IRA owners 50 years of age or older.

The maximum annual contribution increased to $18,500.  For those 50 years of age and older, the additional contribution amount remains unchanged at $6,000.

The maximum annual contribution amount for those under 50 years of age is now $18,500.  The maximum annual contribution amount for those 50 years of age or older has increased to $24,500.

Defined contribution plans and defined benefit plans

The maximum annual contribution by an employer to a defined contribution plan has increased to $55,000 per employee.

For defined benefit plans, the maximum salary for plan contributions has increased to $275,000 per employee.

Maximum contribution amounts for Roth IRAs and IRAs

There are two maximum annual contribution amounts for Roth IRA and IRA accounts. These include the:

  1. $5,500 maximum annual contribution amount for all IRA owners, and
  2. additional $1,000 contribution amount for those IRA owners 50 years of age or older.

These annual contribution amounts remain unchanged for 2018. The maximum annual contribution remains at $5,500. For those 50 years of age and older, the additional contribution amount remains at $1,000.

For both the Roth IRA and the IRA, the amounts contributed cannot exceed the earned income of the IRA owner for the year.

 

{ 2 comments }

JD Miller CPA
The Trusted Financial Planner

The less tax you pay, the more money you have to do other things in your life.  One of the things you could do would be to save this money make your retirement years more fun!

If you’re already retired, you still have choices.  You could enjoy spending more, make your heirs richer, or increase the financial legacy you plan to leave at your death.

Deductions that you take on your tax return reduce the tax you must pay.

Deductions must be allowable and supported by your records

To claim a deduction on your tax return, any deduction, the deduction must be allowable and you must have and keep records that support your deduction.  Your records must show you spent the money or donated your property, in the case of a charitable donation of property, in the year you claim your deduction.

These reminders tell you what records you must have and must keep to take a charitable contribution deduction on your 2011 tax returns.

Contributions are deductible in the year you make them.

Here are some examples:

  1. Donations charged to a credit card before the end of 2015 count for 2015. This is true even if the credit card bill isn’t paid until 2016.
  2. Checks count for 2015 as long as they are mailed in 2015.

These records are evidence that you made the contributions in 2015.

Only donations to qualified organizations are tax-deductible.

Qualified organizations generally give you a receipt with their qualifying information.  Check out the organization if you are unsure.

Churches, synagogues, temples, mosques and government agencies are also eligible to receive deductible donations.

You must itemize your deductions on your tax return to take deductions for charitable contributions.

You cannot claim a deduction for charitable contributions if you choose to use the standard deduction, or if you choose to file one of the short forms, Form 1040A or 1040EZ.

What if you donate property, including clothing and household items, to a qualified charity?

Get a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property.

If you leave a donation at a charity’s unattended drop site, obviously you can’t get a receipt.  But you could still get your deduction.  Note where the unattended donation site was, the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property.

For all of your property donations, you must keep a written record of the donation, the fair market value of the property at the time of the donation, and the method you used to determine that value.

Here’s a quick and easy way to make a record of the property you donated and its condition.  Lay out the property at home and take a picture of it.  Then attach the picture to your receipt.

If you dropped your donation off at an unattended site, you might want to take a picture showing the site and your property.  Again, keep these pictures with you tax records.

Additional rules apply for a contribution of property with a fair market value of $250 or more.

You could take a deduction for donating your motor vehicle, boat or airplane to a charity.

The amount of the deduction is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is greater than $500.

You must be given a Form 1098-C, or a similar statement by the charitable organization for your donation.  You attach this form to your tax return.

As always, you must keep good records and receipts.

 

{ 0 comments }

Charitable contribution deductions save taxes for 2015!

May 7, 2015

Tweet Your charitable contributions can do two good things: Save you taxes. Support charities and causes that do more good in your Community and the World. You save taxes when you can deduct the amounts you contribute each year. Deductions must be allowable and supported by your records To claim a deduction on your tax […]

Read the full article →

How to Eliminate Penalties on Early Withdrawals
from Roth Conversion IRAs

November 3, 2011

Tweet Early withdrawal penalties from IRAs can be HUGE! But they can be eliminated by careful planning steps. Roth IRA withdrawals are subject to the same 10% Federal early withdrawal penalty on the amount withdrawn before the IRA owner is at least 59 ½ years old. But penalties on Roth IRA withdrawals before the IRA […]

Read the full article →

There Are Two 5 Year Rules for Roth Conversions
How to Benefit from Them

November 3, 2011

Tweet Avoiding unnecessary income taxes and penalties on your Roth conversions can be challenging if you don’t understand how the two 5 year rules for Roth conversions work. You must meet both Roth conversion 5 year rules to withdraw your part or all of your money without paying unnecessary income taxes and penalties. The first […]

Read the full article →

What Is A Trustee-to-Trustee Transfer?

June 21, 2011

Tweet A trustee-to-trustee transfer is a direct IRA rollover where the funds go directly from one of your IRAs to another of your IRAs. It is sometimes called a direct transfer. Direct IRA rollovers allow you to make as many transfers as you want to from one IRA to another, from one Roth IRA to […]

Read the full article →

What Is A Tax-Free IRA Rollover?

June 20, 2011

Tweet A tax-free IRA rollover is a rollover that meets both the 60-day rollover rule and the so called “once-per-year” rollover rule. You may be familiar with the 60-day rollover rule for IRAs. But do you know about the “once-per-year” IRA rollover rule for IRA-to-IRA (or Roth IRA-to-Roth IRA) rollovers? Few people, and few advisors, […]

Read the full article →

Protect yourself from penalties on your Roth IRA money!

June 11, 2011

Tweet You must act before October 15, 2011! Here are 2 things you must do to avoid paying penalties on your Roth IRA savings: Pay taxes on your Roth conversions on time. Don’t put more money in your Roth IRA accounts than the rules allow. Protect yourself from penalties on your Roth IRA money! Here’s […]

Read the full article →

Will your children be able to give your grandchildren the education that you gave them?

June 9, 2011

Tweet This question addresses the 3rd of the 5 Great Goals of Life. Like so many people your age, you probably helped your children pay for their college education expenses to give them a jump start in their lives. Perhaps you paid for all of their college education expenses. I could have asked this question […]

Read the full article →

How much of my money will get to my kids and how much will get to the Government?

June 8, 2011

Tweet This is the second Great Goal of Life. How could it impact YOUR life? You’ll discover the answer to the questions below. If you can you conceive of your income going up, if you can conceive of your income increasing at a rate greater than your cost of living, if you can conceive of […]

Read the full article →