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 Here are some of the changes affecting pension and IRA contributions.
1. The maximum contribution that can be made to a defined contribution plan in 2009 under Section 415 is the lesser of $49,000 or 100 percent of compensation- up from $46,000 in 2008.
2. The limit on employee elective deferrals to a 401K or 403b plan has increased from $15,500 in 2008 to $16,500 in 2009. The limit for Section 457 plan salary reductions has likewise been increased to $16,500 for 2009.
3. The maximum elective deferrals for a SIMPLE or 401K SIMPLE plan is $11,500 in 2009, an increase of $1,000 over the 2008 limit.
4. The limit on IRA contributions remains at $5,000 for 2009. Those 50 and older can still contribute an extra $1,000 under the special catch-up provision.
Here are a few of the income tax changes:
1. The standard deduction for those who do not itemize has been increased. For joint filers and surviving spouses, the 2009 standard deduction is $11,400, up $500 from 2008. For heads of household, the deduction is $8,350, and for unmarried individuals it's $5,700. The aged and the blind get an additional $1,100 or $1,400 added to their standard deductions, depending on their filing status.
2. The personal exemption has increased from $3,500 in 2008 to $3,650 for 2009. The exemption begins to be phased out at $250,200 of adjusted gross income for married filers, $208,500 for heads of household, $166,800 for unmarried individuals and $125,100 for married individuals filing separate returns.
3. The phase out of itemized deductions begins at $83,400 of adjusted gross for married individuals filing separate returns, and $166,800 for all other taxpayers.
And here are some other items that may be important to you.
1. The social security tax rate for individuals stays at 7.65% in 2009. The rate for self-employed individuals also remains constant at 15.3%. The taxable wage base for the OASDI portion is $106,800 in 2009-and that gets hit with the full 7.65% tax for individuals. Any additional compensation over that limit is subject to only the Medicare portion of 1.45%.
2. In 2009, the federal annual gift tax exclusion amount has increased from 2008's $12,000 level to $13,000. The lifetime gift tax exemption has remained at $1 million.
3. The federal estate tax exemption has risen from $2 million to $3.5 million. Watch for possible action on federal estate taxes by the new Congress and President.
These changes may affect your own retirement or tax plans.
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