2013 COLA Adjustments | Solo 401k and IRA Contribution Limits Increase

The contribution limits for retirement plans such as solo 401k and IRAS have increased for 2013 thanks to the IRS cost-of-living adjustments (COLAs).  The increase in the contribution limits is attributable to annual inflation.

2013 plan limits

Highlights of the 2013 maximum dollar limitations announced by the IRS include the following:

• Annual defined benefit limit: $205,000, an increase from $200,000 in 2012;

• Annual defined contribution limit (Solo 401k plans fall under this category): $51,000, an increase from $50,000 in 2012;

• Annual compensation limit: $255,000, an increase from $250,000 in 2012;

• 401(k) elective deferrals (Solo 401k plans fall under this category): $17,500, an increase from $17,000 in 2012;

• Annual limit for SIMPLE plans: $12,000, an increase from $11,500 in 2012;

• SEP coverage amount: $550, unchanged from 2012; and

• Highly compensated employee limit: $115,000, unchanged from 2012.

The AGI limits for maximum IRA contributions for individuals covered by a retirement plan are increased from $92,000 to $95,000 for joint filers, and from $58,000 to $59,000 for heads of household and single filers. The AGI limit for joint filers when only one spouse is covered by a retirement plan will be $178,000, up from $173,000 in 2012.

The contribution amount allowed for Roth IRAs begins to phase out for joint filers with incomes exceeding $178,000, up from $173,000 in 2012, and phases out for singles and heads of households with incomes exceeding $112,000, up from $110,000 in 2012.

Self-Directed IRA LLC

Lastly, for those of you that have a self-directed IRA LLC and that choose to make an annual IRA contribution, remember that the IRA contribution must be mailed to the IRA custodian for deposit into the IRA. Once contributed to the IRA, as the manager of the LLC and the IRA participant, you can invest the contribution proceeds in the IRA LLC by completing the IRA custodian’s investment authorization form. It is important that the contribution is made into the IRA first in order to be deemed an IRA contribution and that it is properly reported on Form 5498 by the IRA custodian.   

Source: IRS News Release IR-2012-77.