Every year, the Internal Revenue Service announces 401(k) contribution limits for the upcoming year on its website. The amounts vary by plan and contribution type.
Traditional and Roth 401(k)
As of this publication, if you have a traditional or Roth 401(k), you can contribute annual amounts of:
- $18,000, the standard limit
- $6,000, the additional catch-up amount for employees 50 or older
If your employer contributes to your plan, the combined annual limit cannot be more than the lesser of:
- $53,000, the standard amount
- $59,000 if you're eligible for the catch-up amount
- 100 percent of your total wages or salary for the year, with the compensation limit being $265,000 as of publication
You can have multiple 401(k) accounts, with different employers, but your total contribution limit applies to all accounts as a whole, not separately to each one.
A SIMPLE 401(k) plan is designed for employers with up to 100 employees. In this case, you may contribute:
- $12,500, which is the standard amount
- $3,000, which is the additional catch-up amount for employees 50 and older
Employers may contribute:
- Up to a 3 percent dollar-for-dollar match of your compensation
- A nonelective amount of 2 percent of your wages, meaning the contribution is made regardless of whether you pay into the plan
You can have a solo 401(k), also called a one-participant 401(k), if you have a business and no employees. The plan may allow profit-sharing and employee contributions. Being the owner, you play the role of employee and employer:
- As the employee, you are subject to the same contribution limits as an employee with a traditional or Roth 401(k).
- As the employer, you can contribute up to 25 percent of your self-employment income .
The total of both contributions cannot exceed $53,000, or $59,000 if you are 50 or older.
The solo 401(k) is available to you and your spouse. If your spouse chooses to participate and receives income through the business, she can make separate contributions, up to the same limits that you are subjected to.
If more than your annual limit goes into your account, the extra amount is called excess deferral. If you have excess deferral, report the overage to your employer or plan administrator and request a payout before April 15 of the next year. Your employer or plan administrator has until April 15 of the following year to pay you the excess amount.
Whether your deferral is taxable depends on when you withdraw it:
- If you take the deferral out by April 15 of the following year, the amount is not regarded as taxable income and should not be included in your gross income.
- If you withdraw the deferral after April 15 of the following year, the amount is counted as taxable income for the year in which the contribution was made.
Excess contributions can happen if you have more than one 401(k) account with different employers.