The IRS recently announced cost-of-living adjustments affecting the dollar limitations for retirement plans, deductions, and other items. Some of the limitations will increase for 2012 because the increase in the cost-of-living index met the statutory threshold. However, many limitations did not meet that threshold and remain unchanged from 2011. The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan increased from $16,500 in 2011 to $17,000 in 2012. The catch-up contribution limit for those aged 50 and over remains unchanged at $5,500. You can contribute up to $5,000 ($6,000 if you are age 50 or older by year-end) to your IRA in 2012 if certain conditions are met (i.e., sufficient earned income). The IRA contribution limit is unchanged from 2011. For married couples, the combined contribution limits are $10,000 ($5,000 each) and $12,000 ($6,000 each if both are age 50 by year-end) when a joint return is filed, provided one or both spouses had at least that much earned income. Keep in mind that contributions to traditional IRAs may be tax-deductible, subject to specific limitations that increase for 2012. When you establish and contribute to a Roth IRA, contributions are not deductible, but withdrawals are tax-free when specific requirements are satisfied. In addition, there are no mandatory distribution rules at age 70½ with a Roth IRA, and you can continue to make contributions past age 70½ if you meet the earned income requirement. The 2012 limitation for SIMPLE retirement accounts remains unchanged at $11,500. Likewise, the SIMPLE catch-up contribution for those age 50 by year-end is unchanged from 2011 at $2,500. The 2012 contribution limit for profit-sharing, SEP, and money purchase plans is the lesser of (1) 25% of the employee’s compensation—limited to $250,000, an increase of $5,000 from 2011 or (2) $50,000, an increase of $1,000 from 2011. The social security wage base for computing the social security tax (OASDI) increases to $110,100 in 2012, up from the $106,800 wage base for 2011. The additional $3,300 for 2012 represents an increase of about 3% in the wage base. Finally, the annual exclusion for gifts remains unchanged at $13,000 in 2012.