The IRS has released the 2019 cost-of-living adjustments, resulting in widespread increases to annual deferral limits – including the IRA, which previously hadn’t changed since 2013. Short on time and long on to-dos? For help getting your finances ready for 2019 and tackling your to-do list, also read: 5 Financial Tasks to Prioritize in the New Year.
Maximum Employee Contributions to Defined Contribution Plans: Increase
For employees with 401(k), 403(b), most 457 plans, or the federal government’s Thrift Savings Plan, the contribution limit for 2019 has increased $500, to $19,000.
Annual Catch-up Contributions for Employees Over 50: Unchanged
Workers over 50 years old with defined contribution plans (401(k), 403(b), most 457 plans, or the federal government’s Thrift Savings Plan) can expect another level catch-up contribution limit of $6,000 in 2019.
Overall Contribution Limit (Employer + Employee) for Defined Contribution Plans: Increase
The overall annual additions limit has increased $1,000 to $56,000 in 2019. The total sum of employee contributions, employer additions, and employer profit-sharing contributions cannot exceed $56,000. Catch-up contributions for individuals age 50 or older are not included in the overall limit.
Self-employed and Small Business Owners: SEP IRA and Solo 401(k) Limits: Increase
The total annual contribution limit for both SEP IRAs and Solo 401(k)s has increased $1,000 to $56,000 in 2019. However, the amount that can actually be added each year is subject to an additional limitation: a percentage of W-2 earnings or net self-employment income. In 2019, the compensation limits for these calculations increased $5,000 to $280,000.
SEP IRAs are funded solely by employer contributions. Solo 401(k) plans can be funded by a business owner in two ways: as the employee and the employer, subject to the maximum annual additions limit. Like a traditional 401(k) plan, maximum employee contributions in 2019 has increased $500 to $19,000 for the solo 401(k). As previously mentioned, the employer component is subject to limitations based on earnings. Learn more about retirement planning for small business owners.
SIMPLE IRA and SIMPLE 401(k) Contributions: Increase
Assuming the employee does not participate in another retirement plan, the maximum contribution to a SIMPLE IRA or SIMPLE 401(k) plan will increase $500 in 2019 to $13,000. The catch-up contribution for those over age 50 remains unchanged at $3,000.
However, an employer may either make matching contributions or nonelective contributions to the plan. If the employer makes nonelective contributions, the covered compensation limit has increased to $280,000 in 2019.
Traditional IRAs: Increase
The annual contribution limit for traditional IRAs will increase $500 in 2019 to $6,000. The additional catch-up contribution for those over age 50 will not increase and remain at $1,000. Just about any individual with earned income under age 70 1/2 can contribute to a traditional IRA, however their additions may not be deductible. In 2019 the income phase-out bands that determine whether all (or a portion of) contributions are deductible will increase slightly. Learn more about traditional vs Roth IRAs.
The Deductible IRA Limits for 2019 are as Follows:
If you ARE covered by a retirement plan at work:
Tax Filing Status & Modified Adjusted Gross Income Limits
|Deduction||Single||Married filing jointly|
|Full||$64,000 or less||$103,000 or less|
|Partial; deduction begins to phase out||More than $64,000 and less than $74,000||More than $103,000 and less than $123,000|
|Non-deductible||Above $74,000||Above $123,000|
If you are NOT covered by a retirement plan at work:
Tax Filing Status & Modified Adjusted Gross Income Limits
|Deduction||Single and married filing jointly (neither spouse covered)||Married filing jointly – one spouse covered|
|Full||Any||$193,000 or less|
|Partial; deduction begins to phase out||More than $193,000 and less than $203,000|
Roth IRAs: Increase
Like the traditional IRA, the contribution limits will increase $500 to $6,000 in 2019. The income phase-out limits will also increase: the phase-out range for single filers will be between $122,000 – $137,000 and for married couples filing jointly $193,000 – $203,000. Learn more about Roth strategies for high-earning taxpayers after tax reform.
Health Savings Accounts (HSAs): Increase
Health savings accounts will see a minor increase in 2019 to the pre-tax contribution limit and annual out-of-pocket expense limit. The annual deductible floor for a plan to qualify as a high deductible health plan remains unchanged. To qualify to use a HSA you must have a high deductible health plan (HDHP).
HDHPs must have a minimum annual deductible of $1,350 for individual plans and $2,700 for family plans, which is unchanged from 2018. The maximum annual out-of-pocket expenses cannot exceed $6,750 for individual plans and $13,500 for family plans, marking a (perhaps unwelcome) increase of $100 and $200, respectively.
In 2019, qualified participants may make pre-tax contributions of up to $3,500 for individual plans (up $50 from 2018) and $7,000 for family plans (up $100 from 2018.) Individuals age 55 or older can make catch-up contributions of $1,000 in 2019. Learn more about HSAs.
Flexible Spending Accounts (FSAs): Increase
Employer-sponsored flexible spending accounts can have two components: a health FSA and/or a dependent care FSA. In 2019, annual contributions to a health FSA will increase $50 to $2,700. The dependent care FSA remains unchanged at $5,000 for single parents or married couples filing jointly. Learn more about FSAs.
Social Security Taxable Wage Base: Increase
There will be another large increase to the Social Security taxable wage base in 2019: the limit will go up $4,500, from $128,400 to $132,900. The Social Security tax rate remains unchanged at 6.2% for the employer and 6.2% for the employee.