Income limits for 401K

[iceman5]

[rdale]

[iceman5]

[JJSCOTT2]

[iceman5]

[woody]

You should contact your employer. They should be able to find out the maximum contribution limits for both 2005 and 2006 for your company plan. I believe that the 2006 limits have been released by the IRS.

To the best of my knowledge, there are no income limits for employees of a company or government plan, but again your employer should be able to tell you.

ROTH IRAs do have an income limits for contributions.

Traditional IRAs do not have an income limit for contributions, but in certain cases they do have an income limit for deductability.

Hope that this helps.

[iceman5]

The reason I ask is this:

I make XX amount of money at work and have the max taken out of my check for my 457k.

I also contribute to my Roth IRA. But now that I am making a significant extra amount of money playing poker, when I add that to mine and my wifes total income from work, I wonder if my Roth IRA contributions will be disallowed casuign all kinds of problems.

I actually havent made a Roth contribution yet this year because Im not sure about this. Im pretty sure that that Roth contributions maximums are lowered as you make too much money, but I dont know what the cutoffs are.

[Big_Leon]

Never fear, nerdy CPA is near. I do corporate taxes for a living but I try to keep up with what's going on in the personal tax arena as best I can.

IRA CONTRIBUTIONS (2003)
Maximum 2002 - 2004 $3,000
Maximum 2005 - 2007 $4,000
Maximum 2008 $5,000
Maximum 2009 - subject to annual inflation adjustment
Phase out for Single $95,000 - $110,000 AGI
Phase out for Married $150,000 - $160,000 AGI
note: Rollover contributions are not counted in determining annual maximum
Also, this is for Roth IRAs, traditional IRAs Phase out much much lower. I can look it up if you want.

ITEMIZED DEDUCTION PHASEOUT
3% of excess, limited to 80% total
2004 $142,700
2005 $145,950

Just as an fyi

401K CONTIBUTIONS

2005 $14,000
2006 $15,000

457 PLAN

I'm not too familiar with this. All I know is it's similar to a 401k for state and local governments, etc. The contribution max is the same as the 401k and does not have to be aggregated with your 401k contributions. Meaning, as I read it, that you can put up to $14k in each separate plan.

In regards to 401k phaseouts from high AGI the rules are very convoluted but I'm fairly confident you don't have to worry about that. It's dependent on how the plan is set up and what they deem as "highly compensated employees" in reference to the plan. Also, if you contribute in excess of the max for a 401k nothing bad happens, it's simply post-tax money vs. pre-tax money that you'd be contributing. And if you ARE contributing over that $14k, brother, poker has been very very good to you!

[woody]

[iceman5]

$150K-$160K are the numbers I was looking for. Thanks guys.

*************************************************
ITEMIZED DEDUCTION PHASEOUT
3% of excess, limited to 80% total
2004 $142,700
2005 $145,950
************************************************

Can you explain this to me in laymans terms? Also, when you say AGI...this is adjusted income after exemptions and deductions correct? Not total income.

[Molina]

Could someone knock out 3 sentences or something and educate a Brit about what you're talking about, sounds like a fancy procedure to repel people who want to move to the US.

Molina

[SebQtaneus]

[Big_Leon]

AGI stands for Adjusted Gross Income. If you file a regular 1040 then this will be line 36 on your return. It is before exemptions and standard/itemized deductions. 401k and 457 contributions lower your AGI so those help keep this down. After you take your exemptions and deductions you get to TI (Taxable Income).

On that Itemized Deductions phaseout, if your AGI exceeds $142,700 then you begin to lose some of your itemized deductions. Basically, you lose 3% of AGI over $142,700 up to a total of 80%. For example, if your AGI was equal to $152,700 then it would exceed the threshold by $10,000. $10k times 3% is $300. So you'd lose $300 of your total itemized deductions. So if you made a huge sum of money and your AGI was several hundred thousand, you'd loose a huge chunk, but never more than 80% total.

Ok, anyone still following me?

Also for the IRA, do you have a Roth IRA or a traditional? Just curious because they have some very different features to them. Also, if you are unsure if your income will be too high to contribute, remember that you have until April 15 of 2006 to make your contribution for 2005. You just have to indicate what tax year it is for. I personally make my contributions in February or March for the previous year after I file my tax return.

Hope this helps. If not, keep firing questions at me and I'll keep explaining until it makes sense or you go postal.

Oh and Molina, what this is all about is job security. The more difficult and convoluted it becomes, the less people want to deal with it and the more valuable someone like me becomes.

[JJSCOTT2]

How sad is your life when you know what line it is on the 1040? Haha, I knew that too, I gotta quit taking tax classes.

[iceman5]

I assume that since my pension contributions and insurance premiums are taken out pretax, that this lowers my AGI also?