I read this on IRS site:
Remember that annual contributions to all of your accounts maintained by one employer (and any related employer) - this includes elective deferrals, employee contributions, employer matching and discretionary contributions and allocations of forfeitures, to your accounts,
but not including catch-up contributions
- may not exceed the lesser of 100% of your compensation or $66,000 for 2023
Please clarify...does this mean the catchup contribution is in addition to the 100% earned income limit? ie. total total contribution limit is 100% earned income + additional catchup contribution (if over 50).
thx in advance.
Section 414(v)(2)(A) limits the catch-up to the lesser of the annual amount or the excess of compensation over any other elective deferrals of the participant, whichever is less. In other words, the total is still limited to compensation. For the self-employed, this is correctly done on the Deduction Worksheet for Self-Employed from IRS Pub 560 which TurboTax implements on the Keogh, SEP and SIMPLE Contribution Worksheet.
The very next sentence in the IRS reference you gave says: "This limit increases to $73,500 for 2023; $67,500 for 2022; $64,500 for 2021; and $63,500 for 2020 if you include catch-up contributions."
Total 401(k) plan contributions by an employee and an employer cannot exceed $61,000 in 2022 or $66,000 in 2023. Catch-up contributions bump the 2022 maximum to $67,500 and $73,500 in 2023 for employees who are 50 or older. Total contributions cannot exceed 100% of an employee’s annual compensation.
thx...i understand the increased limits, however the question is regarding those limits being limited by earned income...or not. The IRS statemen seemed to me to say catchup could be made in excess of the earned income limit.
Section 414(v)(2)(A) limits the catch-up to the lesser of the annual amount or the excess of compensation over any other elective deferrals of the participant, whichever is less. In other words, the total is still limited to compensation. For the self-employed, this is correctly done on the Deduction Worksheet for Self-Employed from IRS Pub 560 which TurboTax implements on the Keogh, SEP and SIMPLE Contribution Worksheet.