401(k) Contribution Limit To Go Up in 2012

The IRS recently announced it will increase the allowable tax-free money you can contribute to your 401(k) plan in 2012.

Pension plans, including 401(k)’s, 403(b)s, Thrift Savings Plan and most 457 plans, will now have a contribution limit of $17,000. The reason behind the $500 increase is because of inflation and a rising cost of living.

 In 2012, taxpayers will also benefit from higher tax brackets, an increase in personal exemptions, a rise in the maximum Earned Income Tax Credit and a higher qualifying income limit.  The foreign income deduction and the annual deductible amounts for Medical Savings Accounts will also increase. Next year, social security recipients will receive their first raise in three years with a cost of living adjustment of 3.6%.

To read more about the IRS raising 401(k) contribution limits, visit CNN.