2012 Retirement Account Contribution Limits

You'll be able to stash a little more in your 401(k), 403(b) or Thrift Savings Plan next year. And income limits to deduct IRA contributions will rise.

How much will I be able to contribute to my 401(k) in 2012? Are there new income limits for making tax-deductible contributions to an IRA next year?

The IRS just released the new contribution and income-limit figures for 2012, which in some cases are slightly higher than for 2011.

You’ll be able to contribute up to $17,000 to a 401(k), 403(b), most 457 plans or the federal government’s Thrift Savings Plan in 2012. That’s $500 more than the 2011 maximum contribution limit of $16,500. Workers age 50 and older can continue to make catch-up contributions of up to an extra $5,500 for the year, the same amount as in 2011. If you’ve been contributing the maximum to your 401(k) or other retirement plan, think about boosting your salary deferral amount for 2012.

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The maximum IRA contribution limit for 2012 remains unchanged at $5,000 ($6,000 if you are age 50 or older by the end of the year). But the income eligibility limits to deduct IRA contributions have increased. Single filers and heads of household who participate in a retirement plan at work can deduct the maximum IRA contribution if their modified adjusted gross income is $58,000 or less and a partial contribution is their income is up to $68,000 (up from $56,000 and $66,000 in 2011). Individuals who do not participate in a workplace retirement savings plan can deduct their full IRA contribution regardless of income.

For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is between $92,000 and $112,000 (up from $90,000 and $110,000 in 2011). For an IRA contributor who is not covered by a workplace retirement plan but is married to someone who is covered, the deduction is phased out if the couple’s income is between $173,000 and $183,000 in 2012, up from the $169,000 to $179,000 phase-out range for 2011.

The income eligibility limits to qualify for a Roth IRA contribution have increased, too. Single filers and heads of household can make the maximum contribution to a Roth IRA if their income is less than $110,000 in 2012 (or a partial contribution as long as their income doesn’t top $125,000). Those income eligibility limits are up from the $107,000 to $122,000 phase-out range for 2011. Married couples filing jointly will be able to make the maximum contribution to a Roth IRA in 2012 as long as their modified adjusted gross income is less than $173,000 (and a partial contribution if their joint income does not top $183,000). That’s up from the $169,000 to $179,000 phase-out range for married couples in effect for 2011..

Lower-income individuals may qualify for an extra tax break when they contribute to either an IRA or an employer-based retirement plan in 2012. The income limit to qualify for the savers’ credit increases to $57,500 for married couples filing jointly (up from $56,500 for 2011); $43,125 for heads of household (up from $42,375); and $28,750 for singles (up from $28,250). The size of the credit, which ranges from 10% to 50% of your contribution up to a maximum of $1,000 ($2,000 for married couples), shrinks as your income rises and disappears entirely above those thresholds.

Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.