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Oct 25

IRS Releases 2018 Qualified Retirement Plan Amounts/Social Security Wage Base Increases

IRS Releases 2018 Qualified Retirement Plan Amounts:  The IRS published cost-of-living adjustments to various qualified retirement plans and related amounts for 2018. Many of the limits pertaining to pension and other retirement plans have changed. For instance, the (1) benefit limit for defined benefit plans has increased from $215,000 to $220,000; (2) defined contribution plan limit has increased from $54,000 to $55,000; and (3) elective deferral limit for employees participating in 401(k), 403(b), and most 457 plans has increased from $18,000 to $18,500. However, some limits remain the same. For example, the (1) compensation limit for defining a highly-compensated employee remains at $120,000; (2) limit on annual contributions to an IRA remains at $5,500; and (3) limit on elective deferrals to SIMPLE accounts remains at $12,500.

Social Security Wage Base Increases for 2018:  The Social Security Administration (SSA) announced that the maximum earnings subject to the Social Security component of the FICA tax will increase from $127,200 to $128,700 for 2018. This means that for 2018, the maximum Social Security tax that employers and employees will each pay is $7,979.40 ($128,700 x 6.2%). A self-employed person with at least $128,700 in net self-employment earnings will pay $15,958.80 ($128,700 x 12.40%) for the Social Security part of the self-employment tax. The Medicare component remains 1.45% of all earnings, and individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly, $125,000 for married filing separately) will pay an additional 0.9% in Medicare taxes. Other 2018 cost-of-living adjustments announced by the SSA are available at www.ssa.gov/policy/docs/quickfacts/prog_highlights/RatesLimits2018.html

About Reed Tinsley, CPA

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