Tax Facts

4047 / What is the limit on excludable amounts that may be contributed to tax sheltered annuity plans under salary reduction agreements?

The amount of elective deferrals that an individual can exclude from income for a tax year is limited. Elective deferrals are:

(1)  amounts contributed to tax sheltered annuity plans under salary reduction agreements;

(2)  amounts contributed under cash or deferred arrangements to 401(k) plans ( Q 3751) and salary reduction SEPs (“SAR-SEPs”) ( Q 3705); and

(3)  amounts contributed under salary reductions to SIMPLE IRAs ( Q 3706).1

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