| Pub. 553, Highlights of 2004 Tax Changes |
2004 Tax Year |
Chapter 3 - IRAs and Other Retirement Plans
This is archived information that pertains only to the 2004 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
Individual Retirement Arrangements (IRAs)
For more information about IRAs, see Publication 590, Individual Retirement Arrangements (IRAs).
Modified AGI Limit for Traditional IRAs Increases
For 2004, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA will be reduced
(phased out) if
your modified adjusted gross income (AGI) is:
-
More than $65,000 but less than $75,000 for a married couple filing a joint return or a qualifying widow(er),
-
More than $45,000 but less than $55,000 for a single individual or head of household, or
-
Less than $10,000 for a married individual filing a separate return.
For more information, see How Much Can You Deduct? in chapter 1 of Publication 590.
New Method for Figuring Net Income On Returned or Recharacterized IRA Contributions
There is a new method for figuring the net income on IRA contributions made after 2003 that are returned to you or recharacterized.
See How Do
You Recharacterize a Contribution? or Contributions Returned Before Due Date of Return in chapter 1 of Publication 590.
For figuring the net income on IRA contributions made during 2002 and 2003 that were returned to you or recharacterized, you
can use the new method
described in Publication 590, the method permitted by Notice 2000-39, or the method in the proposed regulations.
Thrift Savings Plan (TSP)
Catch-up contributions.
Participants in the TSP who are age 50 or older at the end of the year generally can make catch-up contributions to
the plan. For 2004, the maximum
catch-up contribution is $3,000. For 2005, the maximum increases to $4,000. For more information, see Publication 721, Tax
Guide to U.S. Civil Service
Retirement Benefits.
The following changes apply to qualified plans. For more information, see Publication 560, Retirement Plans for Small Business.
Limits on Contributions and Benefits
For 2004, the maximum annual benefit for a participant under a defined benefit plan increases to the lsmaller of the following
amounts.
For 2004, a defined contribution plan's maximum annual contributions and other additions (excluding earnings) to the account
of a participant
increases to the smaller of the following amounts.
For 2004, the maximum compensation used for figuring contributions and benefits increases to $205,000.
Elective Deferrals (401(k) Plans)
The limits on elective deferrals for participants in 401(k) plans and SARSEPs (excluding SIMPLE plans) are as follows.
| Year |
Limit |
|
2004 |
$13,000 |
|
2005 |
14,000 |
|
2006 and later years |
15,000 |
| Note. The $15,000 limit is subject to adjustment after 2006 for cost-of-living
increases. |
Catch-up contributions.
A plan can permit participants who are age 50 or older at the end of the calendar year to make catch-up contributions
as follows.
| Year |
Catch-Up Limit |
|
2004 |
$3,000 |
|
2005 |
4,000 |
|
2006 and later years |
5,000 |
| Note. The $5,000 limit is subject to adjustment after 2006 for cost-of-living
increases. |
The catch-up contribution a participant can make for a year cannot exceed the smaller of the following amounts.
Simplified Employee Pensions (SEPs)
The following changes apply to SEPs. For more information, see Publication 560, Retirement Plans for Small Business.
Elective Deferral (SARSEPs) Limit
The limits on elective deferrals and catch-up contributions for participants in SARSEPs are discussed earlier under Elective Deferrals (401(k)
Plans).
Deduction Limit Increased
The maximum deduction for contributions to a SEP remains unchanged at 25% of the compensation paid or accrued during the year
to your eligible
employees participating in the plan. However, for 2004, the maximum combined deduction for a participant's elective deferrals
and other SEP
contributions increases to $41,000.
Contribution Limit Increased
For 2004, the annual limit on the amount of employer contributions to a SEP increases to the smaller of the following amounts.
For 2004, the maximum amount of an employee's compensation you can consider when figuring SEP contributions (including elective
deferrals) and the
deduction for contributions increases to $205,000.
The following changes apply to SIMPLE plans. For more information, see Publication 560, Retirement Plans for Small Business.
Salary reduction contributions.
The limit on salary reduction contributions to a SIMPLE plan is as follows.
| Year |
Limit |
|
2004 |
$9,000 |
|
2005 and later years |
10,000 |
| Note. The $10,000 limit is subject to adjustment after 2005 for cost-of-living
increases. |
Catch-up contributions.
A SIMPLE plan can permit participants who are age 50 or older at the end of the calendar year to make catch-up contributions
as follows.
| Year |
Catch-Up Limit |
|
2004 |
$1,500 |
|
2005 |
2,000 |
|
2006 and later years |
2,500 |
| Note. The $2,500 limit is subject to adjustment after 2006 for cost-of-living
increases. |
The catch-up contribution a participant can make for a year cannot exceed the smaller of the following amounts.
The following changes apply to 403(b) plans. For more information, see Publication 571, Tax-Sheltered Annuity Plans (403(b)
Plans).
Increase in the limit on elective deferrals.
For 2004, the limit on elective deferrals has been increased from $12,000 to $13,000. The limit on elective deferrals
will increase by $1,000 each
year through 2006.
Catch-up contributions.
If you are age 50 or older by the end of 2004, you may be permitted to make additional catch-up contributions of up
to $3,000 to your 403(b) plan.
Limit on annual additions.
For 2004, the limit on annual additions has been increased from $40,000 to $41,000.
Modified AGI Limit for Traditional IRAs Increases
For 2005, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA will be reduced
(phased out) if
your modified adjusted gross income (AGI) is:
-
More than $70,000 but less than $80,000 for a married couple filing a joint return or a qualifying widow(er),
-
More than $50,000 but less than $60,000 for a single individual or head of household, or
-
Less than $10,000 for a married individual filing a separate return.
Traditional IRA Contribution and Deduction Limit
The contribution limit to your traditional IRA for 2005 will be increased to the smaller of the following amounts:
If you are age 50 or older in 2005, the most that can be contributed to your traditional IRA for 2005 will be the smaller
of the following amounts:
Roth IRA Contribution Limit
If contributions on your behalf are made only to Roth IRAs, your contribution limit for 2005 will generally be the lesser
of:
If you are age 50 or older in 2005 and contributions on your behalf are made only to Roth IRAs, your contribution limit for
2005 will generally be
the lesser of:
However, if your modified AGI is above a certain amount, your contribution limit may be reduced. For more information on Roth
IRAs, see chapter
2 of Publication 590.
The following changes apply to qualified plans. For more information, see Publication 560, Retirement Plans for Small Business.
Limits on Contributions and Benefits
For years ending after 2004, the maximum annual benefit for a participant under a defined benefit plan increases to the smaller
of the following
amounts.
-
100% of the participant's average compensation for his or her highest 3 consecutive calendar years.
-
$170,000 (subject to cost-of-living increases).
For years beginning after 2004, a defined contribution plan's maximum annual contributions and other additions (excluding
earnings) to the account
of a participant increases to the smaller of the following amounts.
-
100% of the compensation actually paid to the participant.
-
$42,000 (subject to cost-of-living increases).
For 2005, the maximum compensation used for figuring contributions and benefits increases to $210,000.
Simplified Employee Pensions (SEPs)
The following changes apply to SEPs. For more information, see Publication 560, Retirement Plans for Small Business.
Deduction Limit Increased
The maximum deduction for contributions to a SEP remains unchanged at 25% of the compensation paid or accrued during the year
to your eligible
employees participating in the plan. However, for 2005, the maximum combined deduction for a participant's elective deferrals
and other SEP
contributions increases to $42,000.
Contribution Limit Increased
For years beginning after 2004, the annual limit on the amount of employer contributions to a SEP increases to the smaller
of the following
amounts.
For years beginning after 2004, the maximum amount of an employee's compensation you can consider when figuring SEP contributions
(including
elective deferrals) and the deduction for contributions increases to $210,000.
The following changes apply to 403(b) plans. For more information, see Publication 571, Tax-Sheltered Annuity Plans (403(b)
Plans).
Increase in the limit on elective deferrals.
For 2005, the limit on elective deferrals is increased from $13,000 to $14,000. The limit on elective deferrals will
increase by $1,000 each year
through 2006.
Catch-up contributions.
If you are age 50 or older by the end of 2005, you may be permitted to make additional catch-up contributions of up
to $4,000 to your 403(b) plan.
Limit on annual additions.
For 2005, the limit on annual additions has been increased from $41,000 to $42,000.
For more information about 403(b) plans, see Publication 571, Tax-Sheltered Annuity Plans (403(b) Plans).
Previous | First | Next
Publications Index | 2004 Tax Help Archives | Tax Help Archives Main | Home
|
