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This year, 401k contributions are capped at $17,000 per person.

So let's say somebody contributes this amount and is matched maybe 8% by their employer each contribution period.

Can the total amount be greater than $17,000? At 8% match, I think it would be $18,360.

The reason I ask is because for tax deduction purposes, the person did only contribute $17,000 and can only deduct $17,000 from income taxes, whereas their employer matched the rest.

Thanks for any insight.

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The 17K limit is for people under age 50. The limits do not depend on single or married. –  mhoran_psprep Oct 3 '12 at 11:09
    
Generally an 8% match is not 8% of the contributions but 8% of the salary. Frequently it will be expressed as X% match up to y%; for example: 50% match up to 8%. In that case if you put in 2% they match with 1%, if you put in 8% they put in 4%, if you put in 12% they put in 4%. –  mhoran_psprep Oct 3 '12 at 11:11

1 Answer 1

up vote 4 down vote accepted

The employer contribution is not considered income, thus is not included in the employee's contribution deduction limit. It is affected by an additional limit, not just the 17K. According to the IRS, the total of your and your employer's contributions can be up to 100% of the salary or $50K, the lesser:

Additional limits. There are other limits that restrict contributions made on your behalf. In addition to the limit on elective deferrals, annual contributions to all of your accounts - this includes elective deferrals, employee contributions, employer matching and discretionary contributions and allocations of forfeitures to your accounts - may not exceed the lesser of 100% of your compensation or $49,000 for 2011 and $50,000 for 2012.

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The IRS sets the limits, but some employers do put a maximum cap as a percentage of each paycheck. This generally only impacts people in the company for part of the year. –  mhoran_psprep Oct 3 '12 at 11:05
    
@littleadv Always useful to quote some relevant text from the source link, because a page linked to may change or, worse, disappear. –  Chris W. Rea Oct 4 '12 at 12:33

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