Tax Cuts and Jobs Act to leave Retirement Plans Unscathed

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On Thursday, November 2, Republican leaders in the House of Representatives released a full draft of the tax reform legislation they have championed since the 2016 election. Prior to its release, the bill, called the Tax Cuts and Jobs Act, stirred concerns among retirement investors that the considerable tax advantages provided by 401(k)s and self-directed IRAs would be slashed to accommodate other proposals. However, according to language in the bill and as confirmed by speaker.gov, existing contribution conditions for IRAs, 401(k)s, and other retirement savings vehicles will not change as a result of the Tax Cuts and Jobs Act. The bill has not been officially enacted, but self-directed investors can breathe a sigh of relief for the time being.

Traditional IRA and Roth IRA contribution limits, as well as the tax-deferred or tax-free benefits offered to account holders in relation to their income, will not be diminished for the 2018 tax year ($5,500 for plan holders under the age of 50; $6,500 for account holders age 50 or above). Solo 401(k) holders and health savings account (HSA) holders may actually contribute more:

2018 Contribution Limits

  • Solo 401(k) Employee Contributions: $18,500 if under age 50, $24,500 if age 50 or above ($500-per-year increase on both)
  • Solo 401(k) Employer Contributions: $54,500 if under age 50, $60,500 if age 50 or above ($500-per-year increase on both)
  • HSA Contributions (Single): $3,450 if under age 55, $4,450 if age 55 or above ($50-per-year increase on both)
  • HSA Contributions (Family): $6,900 if under age 55, $7,900 if age 55 or above ($150-per-year increase on both)

Please remember that, if ratified, certain elements of the Tax Cuts and Jobs Act will have likely been revised from those made public on November 2. For more information about your contribution limits or self-directed IRA investing in general, please don’t hesitate to contact New Direction IRA.

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