2011 retirement adjustments

IRS provided the TY11 cost of living adjustments for pension plans and other retirement-related programs. The limits for the most part remain the same as in TY10 or increase modestly. Of most interest to EAs are:

• The contribution limit remains $16,500 for employees participating in § 401(k), 403(b), or 457(b) plans (as well as the federal government's Thrift Savings Plan).
• The age 50-plus catch-up contribution limit under those plans remains at $5,500.
• The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are active participants in an employer-sponsored retirement plan and have modified adjusted gross incomes (AGI) between $56,000 and $66,000 (same as 2010). For married couples filing jointly, in which the spouse who makes the IRA contribution is an active participant in an employer-sponsored retirement plan, the income phase-out range is $90,000 to $110,000 (up from $89,000 to $109,000). For an IRA contributor who is not an active participant in an employer-sponsored retirement plan and is married to someone who is an active participant, the deduction is phased out if the couple's income is between $169,000 and $179,000 (up from $167,000 and $177,000).
• The AGI phase-out range for Roth IRA contributions is $169,000 to 179,000 for married couples filing jointly (up from $167,000 to $177,000 in 2010). For singles and heads of household, the income phase-out range is $107,000 to $122,000 (up from $105,000 to $120,000). For a married individual filing a separate return who is an active participant in an employer-sponsored retirement plan, the phase-out range remains $0 to $10,000.

Don’t let the government pick your pockets

As the leafs turn colors, there has been very little to report for important tax changes in 2010. Most of the changes deal with business and less to do with individuals.

The major credit available is for energy property. Furnace, waterheater, windows and other “Energystar” labeled items can still get up to $1500 of non-refundable credits on your 2010 return. It will end with this year and if you used it up on the 2009 there is no more available. Bring your receipts this winter.

Roth IRA is also a possible benefit you can take advantage of this year. If you convert this year you can defer the tax until 2011 & 2012. Then it grows tax free after that time. Check with your investment advisor for the details.

Conversion to ROTH IRA

There are several options on converting a traditional IRA to a ROTH. You can split the tax over two years. Even if you are married and both convert. Check with your tax professional for the best situation for you.


Married Filing Joint filing status, both taxpayers convert their traditional IRA to ROTH. May they make separate elections on how to pay the tax? One spouse would include in income on the joint return the full amount of their conservation and pay all the tax in 2010 and the other spouse would include in income 1/2 of conservation in 2011 and 1/2 of conservation in 2012 and pay the tax in 2011 and 2012.

Updates to come.