Numbers to Know for 2001

By Clifton Linton
Senior Writer, mPower

In This Story 401(k) Limits Deductible IRA Contributions Roth IRA Contributions and Conversions

There are a few numbers you need to know if you're a 401(k) participant.

As Congress continues to consider legislation to raise 401(k) plan contribution limits, the IRS has issued a new set of limits that already allow some folks to save more in the 2001 tax year. Most of these changes were made to reflect limits that move with the rate of inflation.

Technical Terms Highly compensated employee (HCE) Modified adjusted gross income (MAGI)

Here's a rundown of the key limits 401(k) participants need to know:

401(k) Limits

• The maximum individual pretax contribution is $10,500 a year (same as 2000).
• The maximum employer and employee contribution is $35,000 a year, subject to the 25 percent of pay limitation (up from $30,000 in 2000).
• The maximum pay limit is $170,000 (same as 2000). Any income above that level cannot be used in calculating 401(k) plan contributions.
• The highly compensated employee income threshold is $85,000 (same as 2000).

Deductible IRA Contributions

If you participate in a 401(k) plan, you can deduct a traditional IRA contribution only if your income is within certain limits. These are all $1,000 higher than the 2000 tax year.

• If you participate in a 401(k) plan at work, your traditional IRA contribution will be fully deductible if you are:
  • Single and earn less than $33,000;
  • Married filing jointly and earn less than $53,000; or
  • Married filing separately and have no earned income.
• If you participate in a 401(k) plan at work, your traditional IRA contribution will not be deductible at all if you are:
  • Single and earn more than $43,000;
  • Married filing jointly and earn more than $63,000; or
  • Married filing separately and earn more than $10,000.
• If you participate in a 401(k) plan at work, your traditional IRA contribution will be partially deductible if you are:
  • Single and earn between $33,000 and $43,000;
  • Married filing jointly and earn between $53,000 and $63,000; or
  • Married filing separately and earn between $0 and $10,000.

Roth IRA Contributions and Conversions

Whether you can contribute to a Roth IRA also depends on your modified adjusted gross income. These limits are the same as in 2000.

• You won't be eligible to open a Roth IRA in 2001 if you are:
  • Single and earn more than $110,000;
  • Married filing jointly and earn more than $160,000; or
  • Married filing separately and earn more than $10,000.
• You will be able to fund a Roth IRA with an amount less than $2,000 in 2001 if you are:
  • Single and earn between $95,000 and $110,000;
  • Married filing jointly and earn between $150,000 and $160,000; or
  • Married filing separately and earn between $0 and $10,000.
• You will be able to fund a Roth with the full $2,000 contribution if you are:
  • Single and earn less than $95,000; or
  • Married filing jointly and earn less than $150,000.

Related Reading Washington Power Shift Good News for 401(k) Contribution Limits? Year-end Tax and Retirement Strategies to Make You Merry

As in 2000, you will not be able to convert a traditional IRA to a Roth IRA in 2001 if your modified adjusted gross income is more than $100,000. This applies to single tax return filers as well as married filing jointly filers. Tax filers who are married filing separately aren't permitted to make this conversion. 

The information provided here is intended to help you understand the general issue and does not constitute any tax, investment or legal advice. Consult your financial, tax or legal advisor regarding your own unique situation and your company's benefits representative for rules specific to your plan.

Numbers to Know for 2001

By Clifton Linton
Senior Writer, mPower

In This Story 401(k) Limits Deductible IRA Contributions Roth IRA Contributions and Conversions

There are a few numbers you need to know if you're a 401(k) participant.

As Congress continues to consider legislation to raise 401(k) plan contribution limits, the IRS has issued a new set of limits that already allow some folks to save more in the 2001 tax year. Most of these changes were made to reflect limits that move with the rate of inflation.

Technical Terms Highly compensated employee (HCE) Modified adjusted gross income (MAGI)

Here's a rundown of the key limits 401(k) participants need to know:

401(k) Limits

• The maximum individual pretax contribution is $10,500 a year (same as 2000).
• The maximum employer and employee contribution is $35,000 a year, subject to the 25 percent of pay limitation (up from $30,000 in 2000).
• The maximum pay limit is $170,000 (same as 2000). Any income above that level cannot be used in calculating 401(k) plan contributions.
• The highly compensated employee income threshold is $85,000 (same as 2000).

Deductible IRA Contributions

If you participate in a 401(k) plan, you can deduct a traditional IRA contribution only if your income is within certain limits. These are all $1,000 higher than the 2000 tax year.

• If you participate in a 401(k) plan at work, your traditional IRA contribution will be fully deductible if you are:
  • Single and earn less than $33,000;
  • Married filing jointly and earn less than $53,000; or
  • Married filing separately and have no earned income.
• If you participate in a 401(k) plan at work, your traditional IRA contribution will not be deductible at all if you are:
  • Single and earn more than $43,000;
  • Married filing jointly and earn more than $63,000; or
  • Married filing separately and earn more than $10,000.
• If you participate in a 401(k) plan at work, your traditional IRA contribution will be partially deductible if you are:
  • Single and earn between $33,000 and $43,000;
  • Married filing jointly and earn between $53,000 and $63,000; or
  • Married filing separately and earn between $0 and $10,000.

Roth IRA Contributions and Conversions

Whether you can contribute to a Roth IRA also depends on your modified adjusted gross income. These limits are the same as in 2000.

• You won't be eligible to open a Roth IRA in 2001 if you are:
  • Single and earn more than $110,000;
  • Married filing jointly and earn more than $160,000; or
  • Married filing separately and earn more than $10,000.
• You will be able to fund a Roth IRA with an amount less than $2,000 in 2001 if you are:
  • Single and earn between $95,000 and $110,000;
  • Married filing jointly and earn between $150,000 and $160,000; or
  • Married filing separately and earn between $0 and $10,000.
• You will be able to fund a Roth with the full $2,000 contribution if you are:
  • Single and earn less than $95,000; or
  • Married filing jointly and earn less than $150,000.

Related Reading Washington Power Shift Good News for 401(k) Contribution Limits? Year-end Tax and Retirement Strategies to Make You Merry

As in 2000, you will not be able to convert a traditional IRA to a Roth IRA in 2001 if your modified adjusted gross income is more than $100,000. This applies to single tax return filers as well as married filing jointly filers. Tax filers who are married filing separately aren't permitted to make this conversion. 

The information provided here is intended to help you understand the general issue and does not constitute any tax, investment or legal advice. Consult your financial, tax or legal advisor regarding your own unique situation and your company's benefits representative for rules specific to your plan.