No Change To Your 401(K)
At least that’s what President Trump said the other day on Twitter in response to a report by The New York Times. The story claims that Republicans were considering reducing the cap on tax-deferred 401(k) contributions to as low as $2,400 per year.
The President’s exact words were, “There will be NO change to your 401(k). This has always been a great and popular middle class tax break that works, and it stays!” It had been rumored for months that there was a plan in place to cap the 401(k) contribution in order to help offset the individual and corporate tax cuts that the Trump administration wants to enact by the end of the year.
Under current law, workers can currently put as much as $18,000 , or as much as $24,000 for workers over 50, in 401(k) accounts each year without paying taxes up front. This week the IRS announced that the annual limit on 401(k) contributions for 2018 has been increased to $18,500. And if you’re 50 or older you can make an additional catch-up contribution of $6,000, for a total annual contribution of $24,500.
Trump has made tax cuts the focal point of his legislative agenda and he issued a very general framework in September that called for a reduction in the corporate income tax rate to 20 percent from the current 35 percent. He’s also repeatedly said that the middle class must benefit from the tax cuts.
Republicans have had a difficult time finding offsets for the proposed steep tax cuts to both individuals and corporations. Last week the Senate passed an amendment to repeal the provision that allows Americans to deduct their taxes paid on state and local taxes; including property taxes. The repeal of this provision would greatly impact those individuals who live in high taxed states like New Jersey and New York.