In October of 2010, the IRS released updated guidance on 401k tax rules for 2011, including information on the 401k contribution limits for 2011. However, scanning through the IRS’ website is a nightmare, so here’s what you need to know for 2011:
- Generally speaking, what was true in 2010 is true in 2011. Because there were no cost of living adjustments, basically none of the limits have changed for 2011.
- The limit on contributions to a traditional or Safeharbor 401(k) plan is unchanged at $16,500 for 2010 and 2011 for those under 50.
- If you are 50 or older, you may be eligible to contribute an extra $5,500 to your 401(k) or an extra $2,500 to your SIMPLE 401k plan.
- Thus, doing the math, if you are 50 or older at the end of 2011, your tax deductible limit on 401k’s is $22,000 and for your SIMPLE IRA is $14,000.
- If you contribute to multiple retirement plans, your contributions may be combined across those accounts. For instance, if you have a traditional IRA and a 401k, you will likely not be able to deduct from your taxes more than $16,500 between the two plans if you are under 50, or $22,000 if you are 50 or older.
- If you contribute to a SIMPLE 401k plan, the limit is $11,500 for 2010 and 2011.
- Verify with your plan to make sure that your plan does not impose other limitations on what you can deduct.
- You can’t contribute more than you make or have more than $49,000 in contributions between all of your accounts (including your employer match).
- Your income above $245,000 can’t be considered for an employer match.
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