Q. How will the tax plan affect the deduction for contributing to a 401(k)?
A. The tax bill does change so much, but 401(k) plans squeezed out a win for savers.
There was a provision in the Senate’s bill that would eliminate catch-up contributions for high-income employees, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.
“High income employees were defined as those whose wages exceeded $500,000 or more in the preceding year,” Kiely said. “The House of Representatives bill had no such provision.”
When making changes to the income tax laws, the House of Representatives comes up with its bill and the Senate comes up with its version, Kiely said. The two bills are never identical.
To rectify the differences in the bills, a conference committee made up of members of the House and Senate is set up. Their job is to iron out the differences, Kiely said.
“The bill that conference committee came up with had no such provision, so 401(k) rules remain unchanged,” he said.
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