The maximum amount of money employees can tuck away in their tax-deferred retirement plans, like 401(k)s, will remain unchanged next year at $17,500, the IRS announced Thursday.
The IRS said there wasn't a big enough increase in the Consumer Price Index, which measures inflation, to lead the agency to raise the contribution cap for 401(k)s, 403(b)s, most 457 plans and the federal government's Thrift Savings Plan for 2014.
For the past two years, the IRS has boosted contribution limits by $500 due to rising inflation.
The catch-up contribution limit, which is the amount of tax-deferred money employees over 50 can contribute to their retirement plans in addition to the $17,500 that any employee can contribute -- also remains unchanged at $5,500.
The contribution limit for IRAs will stay the same as well, at $5,500 per year. The catch-up contribution limit is also unchanged.
But more people will be able to qualify for a full tax deduction when they make contributions.
Starting in 2014, the deduction will phase out out for single taxpayers who participate in a workplace retirement plan and have income between $60,000 and $70,000. That's up from this year's range of $59,000 to $69,000. For joint filers where the spouse making the IRA contribution also participates in a workplace retirement plan, the deduction will phase out at incomes of $96,000 to $116,000 -- up from $95,000 to $115,000.
It will also be easier to qualify for the Retirement Savings Contributions Credit of up to $2,000, aimed to help low and middle-income retirement savers. The credit will now be granted to taxpayers with income of less than $60,000 for married couples -- up from $59,000 last year.