# For Employees of Public > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/agency%3Airs%3Acc6d1713a0389c2d ## Record - **Collection:** Agency decision - **Document type:** Agency decision ## Text Future Developments Publication 571 (Rev. January 2026) Tax-Sheltered Annuity Plans (403(b) Plans) For Employees of Public Schools and Certain Tax-Exempt Organizations For the latest information about developments related to Pub. 571, such as legislation enacted after it was published, go to IRS.gov/Pub571. What’s New for 2025 Catch-up contributions. Beginning 2025, people who reached the ages of 60, 61, 62, or 63 before the end of the tax year shall attain higher catch-up contributions between the greater of $10,000 or 150% of the previous catch-up limit, $7,500, in their 403(b) plans. What’s New for 2026 Retirement savings contributions credit. For 2026, the adjusted gross income limitations have increased from $79,000 to $80,500 for married filing jointly filers; from $59,250 to $60,375 for head of household filers; and from $39,500 to $40,250 for single, married filing separately, or qualifying surviving spouse with dependent child filers. See chapter 10, Retirement Savings Contributions Credit (Saver's Credit), for additional information. Limit on elective deferrals. For 2026, the limit on elective deferrals has increased from $23,500 to $24,500. Limit on annual additions. For 2026, the limit on annual additions has increased from $70,000 to $72,000. Reminders Get forms and other information faster and easier at: • IRS.gov (English) • IRS.gov/Korean (한국어) • IRS.gov/Spanish (Español) • IRS.gov/Russian (Pусский) • IRS.gov/Chinese (中文) • IRS.gov/Vietnamese (Tiếng Việt) Jan 7, 2026 Pension-Linked Emergency Savings Accounts. Section 127 of the SECURE 2.0 Act of 2022 allows employers to add an optional feature to provide short-term savings accounts established and maintained in connection with a defined contribution retirement plan, including certain 403(b) plans, and are treated as a type of designated Roth account. Section 127 of the SECURE 2.0 Act of 2022 provides for the creation of Pension-Linked Emergency Savings Accounts (PLESAs) effective for plan years beginning after December 31, 2023. Safe harbor deferral-only section 403(b) plans. Section 121(b) of the SECURE 2.0 Act of 2022 permits certain eligible employers to have a safe harbor deferral-only section 403(b) plan for plan years beginning after December 31, 2023. Military spouse retirement plan eligibility credit. Section 112 of the SECURE 2.0 Act of 2022 provides a business credit for an eligible employer for participation and benefits to a military spouse within 2 months of being hired. Matching contributions on account of qualified student loan payments. Section 110 of the SECURE 2.0 Act of 2022 allows employers to include an optional feature that would enable them to make matching Publication 571 (Rev. 1-2026) Catalog Number 46581C Department of the Treasury Internal Revenue Service www.irs.gov contributions on account of employees’ qualified student loan payments under certain defined contribution retirement plans, including 403(b) plans. Section 110 of the SECURE 2.0 Act of 2022 applies to contributions made for plan years beginning after December 31, 2023. Credit for employer contributions. Section 102 of the SECURE 2.0 Act of 2022 adds an increased small employer pension plan startup cost credit for qualifying small employers with no more than 50 employees and a new credit based on matching and nonelective contributions made by qualifying small employers with no more than 100 employees. Qualified disaster recovery distributions. A qualified disaster recovery distribution is a distribution that meets certain criteria as described in the SECURE 2.0 Act of 2022. It is a distribution made from an eligible retirement plan to an individual whose main home was in a qualified disaster area. You must have sustained an economic loss because of the disaster to receive a qualified disaster recovery distribution. For more information, see Pub. 575, Pension and Annuity Income. De minimis financial incentives. For plan years beginning after December 29, 2022, section 113 of the SECURE 2.0 Act of 2022 permits employers to offer their employees de minimis financial incentives if they make elective deferrals. Distributions for emergency personal expenses. Beginning with distributions made after December 31, 2023, a distribution for an emergency personal expense is not subject to the 10% additional tax on early distributions. Distributions to a domestic abuse victim. For distributions made after December 31, 2023, a distribution made to a domestic abuse victim is not subject to the 10% additional tax on early distributions. Terminally ill individual. The 10% additional tax on early distributions doesn't apply to distributions made to terminally ill individuals. Designated Roth nonelective contributions. Section 604 of the SECURE 2.0 Act of 2022 permits certain nonelective contributions that are made after December 29, 2022, to be designated as Roth contributions. Photographs of missing children. The IRS is a proud partner with the National Center for Missing & Exploited Children® (NCMEC). Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Introduction This publication can help you better understand the tax rules that apply to your 403(b) (tax-sheltered annuity) plan. In this publication, you will find information to help you do the following. • Determine the maximum amount that could have been contributed to your 403(b) account in 2025. • Identify excess contributions. • Understand the basic rules for claiming the retirement savings contributions credit. • Understand the basic rules for distributions and rollovers from 403(b) accounts. This publication doesn’t provide specific information on the following topics. • Distributions from 403(b) accounts. This is covered in Pub. 575, Pension and Annuity Income. • Rollovers. This is covered in Pub. 590-A, Contributions to Individual Retirement Arrangements (IRAs); and Pub. 590-B, Distributions from Individual Retirement Arrangements (IRAs). How to use this publication. This publication is organized into chapters to help you find information easily. Chapter 1 answers questions frequently asked by 403(b) plan participants. Chapters 2 through 6 explain the rules and terms you need to know to figure the maximum amount that could have been contributed to your 403(b) account for 2025 and the maximum amount that can be contributed to your 403(b) account in 2026. Chapter 7 provides general information on the prevention and correction of excess contributions to your 403(b) account. Chapter 8 provides general information on distributions, transfers, and rollovers. Chapter 9 provides blank worksheets that you will need to accurately and actively participate in your 403(b) plan. Filled-in samples of most of these worksheets can be found throughout this publication. Chapter 10 explains the rules for claiming the retirement savings contributions credit (saver's credit). Comments and suggestions. We welcome your comments about this publication and suggestions for future editions. You can send us comments through IRS.gov/ FormComments. Or, you can write to the Internal Revenue Service, Tax Forms and Publications, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Although we can’t respond individually to each comment received, we do appreciate your feedback and will consider your comments and suggestions as we revise our tax forms, instructions, and publications. Don’t send tax questions, tax returns, or payments to the above address. Getting answers to your tax questions. If you have a tax question not answered by this publication or the How To Get Tax Help section at the end of this publication, go to the IRS Interactive Tax Assistant page at IRS.gov/ Help/ITA where you can find topics by using the search feature or by viewing the categories listed. • Determine the maximum amount that can be contributed to your 403(b) account in 2026. 2 Publication 571 (1-2026) Getting tax forms, instructions, and publications. Go to IRS.gov/Forms to download current and prior-year forms, instructions, and publications. Ordering tax forms, instructions, and publications. Go to IRS.gov/OrderForms to order current forms, instructions, and publications; call 800-829-3676 to order prior-year forms and instructions. The IRS will process your order for forms and publications as soon as possible. Don’t resubmit requests you've already sent us. You can get forms and publications faster online. Useful Items What Is a 403(b) Plan? A 403(b) plan, also known as a tax-sheltered annuity (TSA) plan, is a retirement plan for certain employees of public schools, employees of certain tax-exempt organizations, and certain ministers. Individual accounts in a 403(b) plan can be any of the following types. • An annuity contract, which is a contract provided through an insurance company. You may want to see: • A custodial account, which is an account invested in mutual funds or a group trust. Publication • A retirement income account set up for church em- 517 Social Security and Other Information for Members of the Clergy and Religious Workers ployees. Generally, retirement income accounts can invest in annuities, mutual funds, or other investments. 517 575 Pension and Annuity Income We use the term “403(b) account” to refer to any one of these funding arrangements throughout this publication, unless otherwise specified. 575 590-A Contributions to Individual Retirement Arrangements (IRAs) 590-A 590-B Distributions from Individual Retirement Arrangements (IRAs) 590-B What Are the Benefits of Contributing to a 403(b) Plan? Form (and Instructions) W-2 Wage and Tax Statement W-2 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. There are three benefits to contributing to a 403(b) plan. 1099-R • The first benefit is that you don’t pay income tax on al- lowable contributions until you begin making withdrawals from the plan, usually after you retire. Allowable contributions to a 403(b) plan are either excluded or deducted from your income. However, if your contributions are made to a Roth contribution program, this benefit doesn’t apply. Instead, you pay income tax on the contributions to the plan but distributions from the plan (if certain requirements are met) are tax free. Note: Generally, employees must pay social security tax and Medicare tax on their contributions to a 403(b) plan, including those made under a salary reduction agreement. See chapter 4, Limit on Elective Deferrals, for more information. 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts 5329 5330 Return of Excise Taxes Related to Employee Benefit Plans 5330 8880 Credit for Qualified Retirement Savings Contributions 8880 1. • The second benefit is that earnings and gains on 403(b) Plan Basics This chapter introduces you to 403(b) plans and accounts. Specifically, the chapter answers the following questions. • What is a 403(b) plan? • What are the benefits of contributing to a 403(b) plan? • Who can participate in a 403(b) plan? • Who can set up a 403(b) account? • How can contributions be made to my 403(b) account? • Do I report contributions on my tax return? • How much can be contributed to my 403(b) account? Publication 571 (1-2026) Chapter 1 amounts in your 403(b) account aren’t taxed until you withdraw them. Earnings and gains on amounts in a Roth contribution program aren’t taxed if your withdrawals are qualified distributions. Otherwise, they are taxed when you withdraw them. • The third benefit is that you may be eligible to take a credit for elective deferrals contributed to your 403(b) account. See chapter 10, Retirement Savings Contributions Credit (Saver's Credit), for more information. Excluded. If an amount is excluded from your income, it isn’t included in your total wages on your Form W-2. This means that you don’t report the excluded amount on your tax return. Deducted. If an amount is deducted from your income, it is included with your other wages on your Form 403(b) Plan Basics 3 W-2. You report this amount on your tax return, but you are allowed to subtract it when figuring the amount of income on which you must pay tax. Who Can Set up a 403(b) Account? Who Can Participate in a 403(b) Plan? Any eligible employee can participate in a 403(b) plan. Eligible employees. The following employees are eligible to participate in a 403(b) plan. • Employees of tax-exempt organizations established under section 501(c)(3). These organizations are usually referred to as “section 501(c)(3) organizations” or simply “501(c)(3) organizations.” • Employees of public school systems who are involved in the day-to-day operations of a school. • Employees of cooperative hospital service organiza- You can’t set up your own 403(b) account. Only employers can set up 403(b) accounts. A self-employed minister can’t set up a 403(b) account for their own benefit. If you are a self-employed minister, only the organization (denomination) with which you are associated can set up an account for your benefit. How Can Contributions Be Made to My 403(b) Account? • Civilian faculty and staff of the Uniformed Services Generally, only your employer can make contributions to your 403(b) account. However, some plans will allow you to make after-tax contributions (defined below). • Employees of public school systems organized by In- The following types of contributions can be made to 403(b) accounts. tions. University of the Health Sciences. dian tribal governments who are involved in the day-to-day operations of a school. • Certain ministers (explained next). Ministers. The following ministers are eligible employees for whom a 403(b) account can be established. 1. Ministers employed by section 501(c)(3) organizations. 2. Self-employed ministers. A self-employed minister is treated as employed by a tax-exempt organization that is an eligible employer. 3. Ministers (chaplains) who meet both of the following requirements. a. They are employed by organizations that aren’t section 501(c)(3) organizations. b. They function as ministers in their day-to-day professional responsibilities with their employers. Throughout this publication, the term “chaplain” will be used to mean ministers described in the third category in the list above. Example. A minister employed as a chaplain by a state-run prison and a chaplain in the U.S. Armed Forces are eligible employees because their employers aren’t section 501(c)(3) organizations and they are employed as ministers. Universal availability. Generally, all eligible employees (with certain exceptions) of an employer must be permitted to make elective deferrals (including Roth elective deferrals) if any employee of the employer may make elective deferrals. If your employer offers a 403(b) plan, you 4 should have received information about your eligibility to participate. Chapter 1 1. Elective deferrals. These are contributions made under a salary reduction agreement. This agreement allows your employer to withhold money from your paycheck to be contributed directly into a 403(b) account for your benefit. Except for Roth contributions, you don’t pay income tax on these contributions until you withdraw them from the account. If your contributions are Roth contributions, you pay taxes on your contributions but any qualified distributions from your Roth account are tax free. 2. Nonelective contributions. These are employer contributions that aren’t made under a salary reduction agreement. Nonelective contributions include matching contributions, discretionary contributions, and mandatory contributions made by your employer. Except for Roth nonelective contributions, you don't pay income tax on these contributions until you withdraw them from the account. If your nonelective contributions are designated as Roth contributions, you pay taxes on your contributions, but any qualified distributions from your Roth account are tax free. 3. After-tax contributions. These are contributions (that aren’t Roth contributions) you make with funds that you must include in income on your tax return. A salary payment on which income tax has been withheld is a source of these contributions. If your plan allows you to make after-tax contributions, they aren’t excluded from income and you can’t deduct them on your tax return. 4. A combination of any of the three contribution types listed above. 403(b) Plan Basics Publication 571 (1-2026) Self-employed minister. If you are a self-employed minister, you are considered both an employee and an employer, and you can contribute to a retirement income account for your own benefit. Do I Report Elective Deferrals on My Tax Return? Generally, you don’t report elective deferrals to your 403(b) account (except Roth contributions) on your tax return. Your employer will report elective deferrals on your 2025 Form W-2. Elective deferrals will be shown in box 12 with code E for pre-tax amounts and code BB for Roth amounts, and the Retirement plan box will be checked in box 13. If you are a self-employed minister or chaplain, see the discussions next. Designated Roth nonelective contributions that are allocated to your account in 2025 will be reported on your 2025 Form 1099-R. Designated Roth nonelective contributions will be reported in boxes 1 and 2a and code G will be used in box 7. Self-employed ministers. If you are a self-employed minister, you must report the total contributions as a deduction on your tax return. Deduct your contributions on line 16 of the 2025 Schedule 1 (Form 1040). Chaplains. If you are a chaplain and your employer doesn’t exclude contributions made to your 403(b) account from your earned income, you may be able to take a deduction for those contributions on your tax return. However, if your employer has agreed to exclude the contributions from your earned income, you won’t be allowed a deduction on your tax return. If you can take a deduction, include your contributions on line 24g of the 2025 Schedule 1 (Form 1040). How Much Can Be Contributed to My 403(b) Account? There are limits on the amount of contributions that can be made to your 403(b) account each year. If contributions made to your 403(b) account are more than these contribution limits, penalties may apply. Chapters 2 through 6 provide information on how to determine the amount that can be contributed to your 403(b) account. Worksheets are provided in chapter 9 to help you determine the maximum amount that can be contributed to your 403(b) account each year. Chapter 7, Excess Contributions, describes how to prevent excess contributions and how to get an excess contribution corrected. Publication 571 (1-2026) Chapter 2 2. Maximum Amount Contributable (MAC) Throughout this publication, the limit on the amount that can be contributed to your 403(b) account for any year is referred to as your “maximum amount contributable” (MAC). This chapter: • Introduces the components of your MAC, • Tells you how to figure your MAC, and • Tells you when to figure your MAC. Components of Your MAC Generally, before you can determine your MAC, you must first figure the components of your MAC. The components of your MAC are: • The limit on annual additions (chapter 3), and • The limit on elective deferrals (chapter 4). How Do I Figure My MAC? Generally, contributions to your 403(b) account are limited to the lesser of: • The limit on annual additions, or • The limit on elective deferrals. Depending upon the type of contributions made to your 403(b) account, only one of the limits may apply to you. Which limit applies. Whether you must apply one or both of the limits depends on the type of contributions made to your 403(b) account during the year. Elective deferrals only. If the only contributions made to your 403(b) account during the year were elective deferrals made under a salary reduction agreement, you will need to figure both of the limits. Your MAC is the lesser of the two limits. Nonelective contributions only. If the only contributions made to your 403(b) account during the year were nonelective contributions (employer contributions not made under a salary reduction agreement), you will only need to figure the limit on annual additions. Your MAC is the limit on annual additions. Elective deferrals and nonelective contributions. If the contributions made to your 403(b) account were a combination of both elective deferrals made under a salary reduction agreement and nonelective contributions (employer contributions not made under a salary Maximum Amount Contributable (MAC) 5 reduction agreement), you will need to figure both limits. Your MAC is the limit on the annual additions. figuring your limit on annual additions. For more information, see chapter 5. Catch-up contributions. If you are age 50 or older, you may be able to make additional catch-up contributions, which are explained in chapter 6. Participation in a qualified plan. If you participated in a 403(b) plan and a qualified plan, you must combine contributions made to your 403(b) account with contributions to a qualified plan and simplified employee pensions of all corporations, partnerships, and sole proprietorships in which you have more than 50% control to determine the total annual additions. You can use Part I of Worksheet 1 in chapter 9 to figure your limit on annual additions. You need to figure the limit on elective deferrals to determine if you have excess elective deferrals, which are explained in chapter 7. Worksheets. Worksheets are available in chapter 9 to help you figure your MAC. When Should I Figure My MAC? At the beginning of 2026, you should refigure your 2025 MAC based on your actual compensation for 2025. This will allow you to determine if the amount that has been contributed to your 403(b) account for 2025 has exceeded the allowable limits. In some cases, this will allow you to avoid penalties and additional taxes. See chapter 7. Generally, you should figure your MAC for the current year at the beginning of each tax year using a conservative estimate of your compensation. If your compensation changes during the year, you should refigure your MAC based on a revised conservative estimate. By doing this, you will be able to determine if contributions to your 403(b) account can be increased or should be decreased for the year. Includible Compensation for Your Most Recent Year of Service Definition. Generally, includible compensation for your most recent year of service is the amount of taxable wages and benefits you received from the employer that maintained a 403(b) account for your benefit during your most recent year of service. When figuring your includible compensation for your most recent year of service, keep in mind that your most recent year of service may not be the same as your employer's most recent annual work period. This can happen if your tax year isn’t the same as your employer's annual work period. When figuring includible compensation for your most recent year of service, don’t mix compensation or service of one employer with compensation or service of another employer. 3. Most Recent Year of Service Limit on Annual Additions Your most recent year of service is your last full year of service, ending on the last day of your tax year that you worked for the employer that maintained a 403(b) account on your behalf. The first component of your MAC is the limit on annual additions. This is a limit on the total contributions (elective deferrals, nonelective contributions, and after-tax contributions) that can be made to your 403(b) account. The limit on annual additions is generally the lesser of: • $70,000 for 2025 and $72,000 for 2026, or • 100% of your includible compensation for your most recent year of service. Caution: More than one 403(b) account. If you contributed to more than one 403(b) account, you must combine the contributions made to all 403(b) accounts maintained by your employer. If you participate in more than one 403(b) plan maintained by different employers, you don’t need to combine amounts for annual addition limits. Ministers and church employees. If you are a minister or a church employee, you may be able to increase your limit on annual additions or use different rules when 6 Chapter 3 Tax year different from employer's annual work period. If your tax year isn’t the same as your employer's annual work period, your most recent year of service is made up of parts of at least two of your employer's annual work periods. Example. A professor who reports income on a calendar-year basis is employed on a full-time basis by a university that operates on an academic year (October through May). To figure the includible compensation for 2025, the professor's most recent year of service is from January through May 2025 and from October through December 2025. Figuring Your Most Recent Year of Service To figure your most recent year of service, begin by determining what is a full year of service for your position. A full Limit on Annual Additions Publication 571 (1-2026) year of service is equal to full-time employment for your employer's annual work period. After identifying a full year of service, begin counting the service you have provided for your employer starting with the service provided in the current year. Part-time or employed only part of the year. If you are a part-time or a full-time employee who is employed for only part of the year, your most recent year of service is your service this year and your service for as many previous years as is necessary to total 1 full year of service. To determine your most recent year of service, add the following periods of service. • Your service during the year for which you are figuring the limit on annual additions. • Your service during your preceding tax years until the total service equals 1 year of service or you have figured all of your service with the employer. Example. You were employed on a full-time basis from July through December 2023 (1/2 year of service), July through December 2024 (1/2 year of service), and October through December 2025 (1/4 year of service). Your most recent year of service for figuring your limit on annual additions for 2025 is the total of your service during 2025 (1/4 year of service), your service during 2024 (1/2 year of service), and your service during the months of October through December 2023 (1/4 year of service). Not yet employed for 1 year. If, at the close of the year, you haven’t yet worked for your employer for 1 year (including time you worked for the same employer in all earlier years), use the period of time you have worked for the employer as your most recent year of service. Includible Compensation After identifying your most recent year of service, the next step is to identify the includible compensation associated with that full year of service. Includible compensation isn’t the same as income included on your tax return. Compensation is a combination of income and benefits received in exchange for services provided to your employer. Generally, includible compensation is the amount of income and benefits: • Received from the employer who maintains your 403(b) account, and • It must be included in your income. Includible amounts. compensation includes the following • Elective deferrals (employer's contributions made on your behalf under a salary reduction agreement). • Amounts contributed or deferred by your employer under a section 125 cafeteria plan. • Amounts contributed or deferred, at the election of the employee, under an eligible section 457 nonqualified Publication 571 (1-2026) Chapter 3 deferred compensation plan (state or local government or tax-exempt organization plan). Note: For information about treating elective deferrals under section 457 plans as Roth contributions, see Pub. 575. • Wages, salaries, and fees for personal services earned with the employer maintaining your 403(b) account. • Income otherwise excluded under the foreign earned income exclusion. • Pre-tax contributions (employer's contributions made on your behalf according to your election) to a qualified transportation fringe benefit plan. Includible compensation does not include the following items. 1. Your employer's contributions to your 403(b) account. 2. Compensation earned while your employer wasn’t an eligible employer. 3. Your employer's contributions to a qualified plan that: a. Are on your behalf, and b. Are excludable from income. 4. The cost of incidental life insurance. See Cost of Incidental Life Insurance, later. Caution: If you are a church employee or a foreign missionary, figure includible compensation using the rules explained in chapter 5. Contributions after retirement. Nonelective contributions may be made for an employee for up to 5 years after retirement. These contributions would be based on includible compensation for the last year of service before retirement. Cost of Incidental Life Insurance Includible compensation doesn’t include the cost of incidental life insurance. Caution: If all of your 403(b) accounts invest only in mutual funds, then you have no incidental life insurance. If you have an annuity contract, a portion of the cost of that contract may be for incidental life insurance. If so, the cost of the insurance is taxable to you in the year contributed and is considered part of your basis when distributed. Your employer will include the cost of your insurance as taxable wages in box 1 of Form W-2. Not all annuity contracts include life insurance. Contact your plan administrator to determine if your contract includes incidental life insurance. If it does, you will need to figure the cost of life insurance each year the policy is in effect. Figuring the cost of incidental life insurance. If you have determined that part of the cost of your annuity contract is for an incidental life insurance premium, you Limit on Annual Additions 7 will need to determine the amount of the premium and subtract it from your includible compensation. Figure 3-1. Table of 1-Year Term Premiums for $1,000 Life Insurance Protection To determine the amount of the life insurance premiums, you will need to know the following information. Age Cost Age Cost Age Cost 0 . . . . 1 . . . . 2 . . . . 3 . . . . 4 . . . . 5 . . . . 6 . . . . 7 . . . . 8 . . . . 9 . . . . 10 . . . 11 . . . 12 . . . 13 . . . 14 . . . 15 . . . 16 . . . 17 . . . 18 . . . 19 . . . 20 . . . 21 . . . 22 . . . 23 . . . 24 . . . 25 . . . 26 . . . 27 . . . 28 . . . 29 . . . 30 . . . 31 . . . 32 . . . 33 . . . 34 . . . $0.70 0.41 0.27 0.19 0.13 0.13 0.14 0.15 0.16 0.16 0.16 0.19 0.24 0.28 0.33 0.38 0.52 0.57 0.59 0.61 0.62 0.62 0.64 0.66 0.68 0.71 0.73 0.76 0.80 0.83 0.87 0.90 0.93 0.96 0.98 35 . . . 36 . . . 37 . . . 38 . . . 39 . . . 40 . . . 41 . . . 42 . . . 43 . . . 44 . . . 45 . . . 46 . . . 47 . . . 48 . . . 49 . . . 50 . . . 51 . . . 52 . . . 53 . . . 54 . . . 55 . . . 56 . . . 57 . . . 58 . . . 59 . . . 60 . . . 61 . . . 62 . . . 63 . . . 64 . . . 65 . . . 66 . . . 67 . . . 68 . . . 69 . . . $0.99 1.01 1.04 1.06 1.07 1.10 1.13 1.20 1.29 1.40 1.53 1.67 1.83 1.98 2.13 2.30 2.52 2.81 3.20 3.65 4.15 4.68 5.20 5.66 6.06 6.51 7.11 7.96 9.08 10.41 11.90 13.51 15.20 16.92 18.70 70 . . . 71 . . . 72 . . . 73 . . . 74 . . . 75 . . . 76 . . . 77 . . . 78 . . . 79 . . . 80 . . . 81 . . . 82 . . . 83 . . . 84 . . . 85 . . . 86 . . . 87 . . . 88 . . . 89 . . . 90 . . . 91 . . . 92 . . . 93 . . . 94 . . . 95 . . . 96 . . . 97 . . . 98 . . . 99 . . . $20.62 22.72 25.07 27.57 30.18 33.05 36.33 40.17 44.33 49.23 54.56 60.51 66.74 73.07 80.35 88.76 99.16 110.40 121.85 133.40 144.30 155.80 168.75 186.44 206.70 228.35 250.01 265.09 270.11 281.05 • The value of your life insurance contract, which is the amount payable upon your death. • The cash value of your life insurance contract at the end of the tax year. • Your age on your birthday nearest the beginning of the policy year. • Your current life insurance protection under an ordi- nary retirement income life insurance policy, which is the amount payable upon your death minus the cash value of the contract at the end of the year. You can use Worksheet A in chapter 9 to determine the cost of your incidental life insurance. Example. Your new contract provides that your beneficiary will receive $10,000 if you should die before retirement. Your cash value in the contract at the end of the first year is zero. Your current life insurance protection for the first year is $10,000 ($10,000 − $0). The cash value in the contract at the end of year 2 is $1,000, and the current life insurance protection for the second year is $9,000 ($10,000 – $1,000). The 1-year cost of the protection can be calculated by using Figure 3-1. The premium rate is determined based on your age on your birthday nearest the beginning of the policy year. Caution: If the current published premium rates per $1,000 of insurance protection charged by an insurer for individual 1-year term life insurance premiums available to all standard risks are lower than those in the preceding table, you can use the lower rates for figuring the cost of insurance in connection with individual policies issued by the same insurer. Example 1. An employee, age 44, and the employer enter into a 403(b) plan that will provide the employee with a $500 a month annuity upon retirement at age 65. The agreement also provides that if the employee should die before retirement, the beneficiary will receive the greater of $20,000 or the cash surrender value in the life insurance contract. Using the facts presented, we can determine the cost of the employee’s life insurance protection as shown in Table 3-1. The employer has included $28 for the cost of the life insurance protection in the employee’s current-year income. When figuring includible compensation for this year, the employee will subtract $28. 8 Chapter 3 Limit on Annual Additions Publication 571 (1-2026) Table 3-1. Worksheet A. Cost of Incidental Life Insurance You can use Worksheet Bin chapter 9 to determine your includible compensation for your most recent year of service. Note: Use this worksheet to figure the cost of incidental life insurance included in your annuity contract. This amount will be used to figure includible compensation for your most recent year of service. 1. Enter the value of the contract (amount payable upon your death) . . . . . . . . . . . 1. $20,000.00 2. Enter the cash value in the contract at the end of the year . . . . . . . . . . . . . . . . . . 2. 0.00 3. Subtract line 2 from line 1. This is the value of your current life insurance protection . . . 3. $20,000.00 4. Enter your age on your birthday nearest the beginning of the policy year . . . . . . . . . . 4. 44 5. Enter the 1-year term premium for $1,000 of life insurance based on your age. (From Figure 3-1) . . . . . . . . . . . . . . . . . . . . . 5. $1.40 6. Divide line 3 by $1,000 . . . . . . . . . . . . . 6. 20 7. Multiply line 6 by line 5. This is the cost of your incidental life insurance . . . . . . . . . . 7. $28.00 Example 2. The employee’s cash value in the contract at the end of the second year is $1,000. In year 2, the cost of the employee’s life insurance is figured as shown in Table 3-2. In year 2, the employer will include $29.07 in the employee’s current-year income. The employee will subtract this amount when figuring the includible compensation. 1. Enter the value of the contract (amount payable upon your death) . . . . . . . . . . . 1. $20,000.00 2. Enter the cash value in the contract at the end of the year . . . . . . . . . . . . . . . . . . 2. $1,000.00 3. Subtract line 2 from line 1. This is the value of your current life insurance protection . . 3. $19,000.00 4. Enter your age on your birthday nearest the beginning of the policy year . . . . . . . 4. 45 5. Enter the 1-year term premium for $1,000 of life insurance based on your age. (From Figure 3-1) . . . . . . . . . . . . . . . . . . . . 5. $1.53 6. Divide line 3 by $1,000 . . . . . . . . . . . . . 6. 19 7. Multiply line 6 by line 5. This is the cost of your incidental life insurance . . . . . . . . . $29.07 Figuring Includible Compensation for Your Most Recent Year of Service You can use Worksheet B in chapter 9 to determine your includible compensation for your most recent year of service. Chapter 3 Note: This table shows information Max will use to figure includible compensation for the most recent year of service. Year 2025 Note: Use this worksheet to figure the cost of incidental life insurance included in your annuity contract. This amount will be used to figure includible compensation for your most recent year of service. Publication 571 (1-2026) Table 3-3. Max’s Compensation 2026 Table 3-2. Worksheet A. Cost of Incidental Life Insurance 7. Example. Max has been periodically working full-time for a local hospital since September 2023. Max needs to figure the limit on annual additions for 2026. The hospital's normal annual work period for employees in Max's general type of work runs from January to December. During the periods that Max was employed with the hospital, the hospital was always eligible to provide a 403(b) plan to employees. Additionally, the hospital never provided the employees with a 457 deferred compensation plan, a transportation fringe benefit plan, or a cafeteria plan. Max has never worked abroad and there is no life insurance provided under the plan. Table 3-3 shows the service Max provided to the employer, compensation for the periods worked, elective deferrals, and taxable wages. 2024 Years of Service 6/12 of a year 4/12 of a year 4/12 of a year Taxable Wages Elective Deferrals $42,000 $2,000 $16,000 $1,650 $16,000 $1,650 Before figuring the limit on annual additions, Max must figure includible compensation for the most recent year of service. Because Max isn’t planning to work the entire 2026 year, Max’s most recent year of service will include the time planning to work in 2026 plus time worked in the preceding 3 years until the time worked for the hospital totals 1 year. If the total time worked is less than 1 year, Max will treat it as if it were 1 year. Max figures the most recent year of service shown in the following list. • Time Max will work in 2026 is 6/12 of a year. • Time worked in 2025 is 4/12 of a year. All of this time will be used to determine Max's most recent year of service. • Time worked in 2024 is 4/12 of a year. Max only needs 2 months of the 4 months worked in 2024 to have enough time to total 1 full year. Because Max needs only 1/2 of the actual time worked, Max will use only 1/2 of income earned during that period to figure wages that will be used in figuring the includible compensation. Limit on Annual Additions 9 Table 3-4. Worksheet B. Includible Compensation for Your Most Recent Year of Service1 Note: Use this worksheet to figure includible compensation for your most recent year of service. 1. Enter your includible wages from the employer maintaining your 403(b) account for your most recent year of service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. $66,000 2. Enter elective deferrals excluded from your gross income for your most recent year of service2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. 4,4753 3. Enter amounts contributed or deferred by your employer under a cafeteria plan for your most recent year of service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. -0- 4. Enter amounts contributed or deferred by your employer according to your election to your 457 account (a nonqualified plan of a state or local government or of a tax-exempt organization) for your most recent year of service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. -0- 5. Enter pre-tax contributions (employer's contributions made on your behalf according to your election) to a qualified transportation fringe benefit plan for your most recent year of service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. -0- 6. Enter your foreign earned income exclusion for your most recent year of service . . . . . . . . . . . . . 6. -0- 7. Add lines 1, 2, 3, 4, 5, and 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. 70,475 8. Enter the cost of incidental life insurance that is part of your annuity contract for your most recent year of service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. -0- 9. Enter compensation that was both: • Earned during your most recent year of service, and • Earned while your employer wasn’t qualified to maintain a 403(b) plan . . . . . . . . . . . . . . . . . . 9. -0- 10. Add lines 8 and 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. -0- 11. Subtract line 10 from line 7. This is your includible compensation for your most recent year of service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. 70,475 1 Use estimated amounts if figuring includible compensation before the end of the year. 2 Elective deferrals made to a designated Roth account aren’t excluded from your gross income and shouldn’t be included on this line. $4,475 ($2,000 + $1,650 + $825). 3 Using the information provided in Table 3-3, wages for Max's most recent year of service are $66,000 ($42,000 + $16,000 + $8,000). Max’s includible compensation for the most recent year of service is figured as shown in Table 3-4. 10 Chapter 3 After figuring the includible compensation, Max determines the limit on annual additions for 2026 to be $72,000, the lesser of the includible compensation, $70,475 (Table 3-4), and the maximum amount of $72,000. Limit on Annual Additions Publication 571 (1-2026) General Limit 4. Under the general limit on elective deferrals, the most that can be contributed to your 403(b) account through a salary reduction agreement is $23,500 for 2025 and $24,500 for 2026. This limit applies without regard to community property laws. Limit on Elective Deferrals The second and final component of your MAC is the limit on elective deferrals. This is a limit on the amount of contributions that can be made to your account through a salary reduction agreement. A salary reduction agreement is an agreement between you and your employer that allows for a portion of your compensation to be directly invested in a 403(b) account on your behalf. You can enter into more than one salary reduction agreement during a year. Caution: More than one 403(b) account. If, for any year, elective deferrals are contributed to more than one 403(b) account for you (whether or not with the same employer), you must combine all the elective deferrals to determine whether the total is more than the limit for that year. 403(b) plan and another retirement plan. If, during the year, contributions in the form of elective deferrals are made to other retirement plans on your behalf, you must combine all of the elective deferrals to determine if they are more than your limit on elective deferrals. The limit on elective deferrals applies to amounts contributed to: • 401(k) plans, to the extent excluded from income; • Roth contribution programs; • Section 501(c)(18) plans, to the extent excluded from income; • Savings incentive match plan for employees (SIMPLE) plans; • Salary reduction simplified employee pension (SARSEP) plans; and • All 403(b) plans. Roth contribution program. Your 403(b) plan may allow you to designate all or a portion of your elective deferrals as Roth contributions. Elective deferrals designated as Roth contributions must be maintained in a separate Roth account and aren’t excludable from your gross income. The maximum amount of contributions allowed under a Roth contribution program is your limit on elective deferrals, less your elective deferrals not designated as Roth contributions. For more information on the Roth contribution program, see Pub. 560, Retirement Plans for Small Business. Excess elective deferrals. If the amount contributed is more than the allowable limit, you must include the excess that isn’t a Roth contribution in your gross income for the year contributed. Publication 571 (1-2026) Chapter 4 15-Year Rule If you have at least 15 years of service with an educational organization (such as a public or private school), hospital, home health service agency, health and welfare service agency, church, or convention or association of churches (or associated organization) and it is allowed by the terms of the plan document, the limit on elective deferrals to your 403(b) account is increased by the least of: 1. $3,000; 2. $15,000, reduced by the sum of: a. The additional pre-tax elective deferrals made in prior years because of this rule, plus b. The aggregate amount of designated Roth contributions permitted for prior years because of this rule; or 3. $5,000 times the number of your years of service for the organization, minus the total elective deferrals made by your employer on your behalf for earlier years. If you qualify for the 15-year rule (sometimes referred to as the “special section 403(b) catch-up” or the “years-of-service catch-up”), your elective deferrals under this limit can be as high as $26,500 for 2025 and $27,500 for 2026. To determine whether you have 15 years of service with your employer, see Years of Service next. Years of Service To determine if you are eligible for the increased limit on elective deferrals, you will first need to figure your years of service. How you figure your years of service depends on whether you were a full-time or a part-time employee, whether you worked for the full year or only part of the year, and whether you have worked for your employer for an entire year. You must figure years of service for each year during which you worked for the employer who is maintaining your 403(b) account. If more than one employer maintains a 403(b) account for you in the same year, you must figure years of service separately for each employer. For purposes of the 15-year rule, years of service are figured through the year for which the calculation is being Limit on Elective Deferrals 11 made. For example, to determine the limit for 2024, you count years of service through 2025. Definition Your years of service are the total number of years you have worked as a full-time employee for the employer maintaining your 403(b) account as of the end of the year. Table 4-1. Teacher's Years of Service Note: This table shows how the teacher figures the years of service, as explained in the previous example. Year Period Worked Portion of Work Period Years of Service 2021 Sept.–Dec. 0.5 year 0.5 year Figuring Your Years of Service 2022 Take the following rules into account when figuring your years of service. 2023 Status of employer. Your years of service include only periods during which your employer was an eligible employer. Your plan administrator can tell you whether or not your employer was qualified during all your periods of service. Service with one employer. Generally, you can’t count service for any employer other than the one who maintains your 403(b) account. Church employee. If you are a church employee, treat all of your years of service with related church organizations as years of service with the same employer. For more information about church employees, see chapter 5. Self-employed ministers. If you are a self-employed minister, your years of service include full and part years in which you have been treated as employed by a tax-exempt organization that is an eligible employer. Total years of service. When figuring prior years of service, figure each year individually and then add the individual years of service to determine your total years of service. Example. The annual work period for full-time teachers employed by ABC Public Schools is September through December and February through May. A teacher began working with ABC Public Schools in September 2021. The teacher has always worked full-time for each annual work period. At the end of 2025, the teacher had 4.5 years of service with ABC Public Schools, as shown in Table 4-1. 2024 2025 Feb.–May 0.5 year Sept.–Dec. 0.5 year Feb.–May 0.5 year Sept.–Dec. 0.5 year Feb.–May 0.5 year Sept.–Dec. 0.5 year Feb.–May 0.5 year Sept.–Dec. 0.5 year Total years of service 1 year 1 year 1 year 1 year 4.5 years Full-time or part-time. To figure your years of service, you must analyze each year individually and determine whether you worked full-time for the full year or something other than full-time. When determining whether you worked full-time or something other than full-time, use your employer's annual work period as the standard. Employer's annual work period. Your employer's annual work period is the usual amount of time an individual working full-time in a specific position is required to work. Generally, this period of time is expressed in days, weeks, months, or semesters, and can span 2 calendar years. Note: You can’t accumulate more than 1 year of service in a 12-month period. Example. All full-time teachers at ABC Public Schools are required to work both the September through December semester and the February through May semester. Therefore, the annual work period for full-time teachers employed by ABC Public Schools is September through December and February through May. Teachers at ABC Public Schools who work both semesters in the same calendar year are considered working a full year of service in that calendar year. Full-Time Employee for the Full Year Count each full year during which you were employed full-time as 1 year of service. In determining whether you were employed full-time, compare the amount of work you were required to perform with the amount of work normally required of others who held the same position with the same employer and who generally received most of their pay from the position. How to compare. You can use any method that reasonably and accurately reflects the amount of work required. For example, if you are a teacher, you can use the number of hours of classroom instruction as a measure of the amount of work required. 12 Chapter 4 Limit on Elective Deferrals Publication 571 (1-2026) In determining whether positions with the same employer are the same, consider all of the facts and circumstances concerning the positions, including the work performed, the methods by which pay is determined, and the descriptions (or titles) of the positions. Part-time for the full year. If, during a year, you were employed part-time for the employer's entire annual work period, you figure the fraction for that year as follows. Example. An assistant professor employed in the English department of a university will be considered a full-time employee if the amount of work that an assistant professor is required to perform is the same as the amount of work normally required of assistant professors of English at that university who get most of their pay from that position. If no one else works for your employer in the same position, compare your work with the work normally required of others who held the same position with similar employers or similar positions with your employer. • The denominator (bottom number) is the number of Full year of service. A full year of service for a particular position means the usual annual work period of anyone employed full-time in that general type of work at that place of employment. • The numerator (top number) is the number of hours or days you worked. hours or days normally required of someone holding the same position who works full-time. Example. Alex teaches one course at a local medical school 3 hours per week for 2 semesters. Other faculty members at the same school teach 9 hours per week for 2 semesters. The annual work period of the medical school is 2 semesters. An instructor teaching 9 hours a week for 2 semesters is considered a full-time employee. Given these facts, Alex has worked part-time for a full annual work period. Alex has completed 1/3 of a year of service, figured as shown below. Number of hours worked per week Number of hours per week considered full-time 3 = 9 1 = 3 Example. If a doctor works for a hospital 12 months of a year except for a 1-month vacation, the doctor will be considered as employed for a full year if the other doctors at that hospital also work 11 months of the year with a 1-month vacation. Similarly, if the usual annual work period at a university consists of the fall and spring semesters, an instructor at that university who teaches these semesters will be considered as working a full year. Part-time for part of the year. If, during any year, you were employed part-time for only part of your employer's annual work period, you figure your fraction for that year by multiplying two fractions. Figure the first fraction as though you had worked full-time for part of the annual work period. The fraction is as follows. Other Than Full-Time for the Full Year • The numerator (top number) is the number of weeks, If, during any year, you were employed full-time for only part of your employer's annual work period, part-time for the entire annual work period, or part-time for only part of the work period, your year of service for that year is a fraction of your employer's annual work period. • The denominator (bottom number) is the number of Full-time for part of the year. If, during a year, you were employed full-time for only part of your employer's annual work period, figure the fraction for that year as follows. • The numerator (top number) is the number of weeks, months, or semesters you were a full-time employee. • The denominator (bottom number) is the number of weeks, months, or semesters considered the normal annual work period for the position. Example. An instructor was employed full-time by a local college for the 4 months of the 2025 spring semester (February 2025 through May 2025). The annual work period for the college is 8 months (February through May and July through October). Given these facts, the instructor was employed full-time for part of the annual work period and provided 1/2 of a year of service. The instructor’s years of service computation for 2025 is as follows. Number of months worked Number of months in annual work period Publication 571 (1-2026) 4 = 8 1 = Chapter 4 months, or semesters you were a full-time employee. weeks, months, or semesters considered the normal annual work period for the position. Figure the second fraction as though you had worked part-time for the entire annual work period. The fraction is as follows. • The numerator (top number) is the number of hours or days you worked. • The denominator (bottom number) is the number of hours or days normally required of someone holding the same position who works full-time. Once you have figured these two fractions, multiply them together to determine the fraction representing your partial year of service for the year. Example. An attorney teaches a course 3 hours per week for 1 semester at a law school. The annual work period for teachers at the school is 2 semesters. All full-time instructors at the school are required to teach 12 hours per week. Based on these facts, the attorney is employed part-time for part of the annual work period. The attorney’s year of service for this year is determined by multiplying two fractions. The computation is as follows. 2 Limit on Elective Deferrals 13 Example Attorney’s first fraction Number of semesters worked 1 = Number of semesters in annual work period Max has figured the limit on annual additions. The only other component needed before Max can determine his MAC for 2026 is the limit on elective deferrals. 2 Attorney's second fraction Number of hours worked per week Number of hours per week considered full-time 3 = 12 1 = 4 The attorney would multiply these fractions to obtain the fractional year of service. 1 2 x 1 4 = 1 8 Figuring the Limit on Elective Deferrals You can use Part II of Worksheet 1 in chapter 9 to figure the limit on elective deferrals. 14 Chapter 4 Figuring Max's limit on elective deferrals. Max has been employed with the current employer for less than 15 years. Max isn’t eligible for the special 15-year increase. Therefore, the limit on elective deferrals for 2026 is $24,500, as shown in Table 4-2. Max's employer won’t make any nonelective contributions to the 403(b) account and Max won’t make any after-tax contributions. Additionally, Max's employer doesn’t offer a Roth contribution program. Figuring Max's MAC Max has determined that the limit on annual additions for 2026 is $72,000 and the limit on elective deferrals is $24,500. Because elective deferrals are the only contributions made to Max's account, the maximum amount that can be contributed to a 403(b) account on Max's behalf in 2026 is $24,500, the lesser of both limits. Limit on Elective Deferrals Publication 571 (1-2026) Table 4-2. Worksheet 1. Maximum Amount Contributable (MAC) Note: Use this worksheet to figure your MAC. Part I. Limit on Annual Additions 1. Enter your includible compensation for your most recent year of service . . . . . . . . . . . . . . . . . . 1. $70,475 2. Maximum: • For 2025, enter $70,000. • For 2026, enter $72,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. 72,000 3. Enter the lesser of line 1 or line 2. This is your limit on annual additions . . . . . . . . . . . . . . . . . . . 3. 72,000 4. 24,500 5. Amount per year of service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. 5,000 6. Enter your years of service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. 7. Multiply line 5 by line 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. 8. Enter the total of all elective deferrals made for you by the qualifying organization for prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. 9. Subtract line 8 from line 7. If zero or less, enter zero (-0-) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. -0- 10. Maximum increase in limit for long service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. 15,000 11. Enter the total of additional pre-tax elective deferrals made in prior years under the 15-year rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. 12. Enter the aggregate amount of all designated Roth contributions permitted for prior years under the 15-year rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. 13. Add lines 11 and 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13. 14. Subtract line 13 from line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14. 15. Maximum additional contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15. 3,000 16. Enter the least of line 9, line 14, or line 15. This is your increase in the limit for long service . . . . . 16. -0- 17. Add lines 4 and 16. This is your limit on elective deferrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17. 24,500 18. 24,500 Caution: If you had only nonelective contributions, skip Part II and enter the amount from line 3 on line 18. Part II. Limit on Elective Deferrals 4. Maximum contribution: • For 2025, enter $23,500. • For 2026, enter $24,500 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note: If you have at least 15 years of service with a qualifying organization, complete lines 5 through 17. If not, enter zero (-0-) on line 16 and go to line 17. Part III. Maximum Amount Contributable 18. • If you had only nonelective contributions, enter the amount from line 3. This is your MAC. • If you had only elective deferrals, enter the lesser of line 3 or line 17. This is your MAC. • If you had both elective deferrals and nonelective contributions, enter the amount from line 3. This is your MAC. (Use the amount on line 17 to determine if you have excess elective deferrals as explained in chapter 7.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Publication 571 (1-2026) Chapter 4 Limit on Elective Deferrals 15 Changes to Includible Compensation for Most Recent Year of Service 5. Ministers and Church Employees Self-employed ministers and church employees who participate in 403(b) plans generally follow the same rules as other 403(b) plan participants. This means that if you are a self-employed minister or a church employee, your MAC is generally the lesser of: There are two types of changes in determining includible compensation for the most recent year of service. They are: • Changes in how the includible compensation of for- eign missionaries and self-employed ministers is figured, and • A change to the years that are counted when figuring the most recent year of service for church employees and self-employed ministers. • Your limit on annual additions, or • Your limit on elective deferrals. For most ministers and church employees, the limit on annual additions is figured without any changes. This means that if you are a minister or church employee, your limit on annual additions is generally the lesser of: • $70,000 for 2025 and $72,000 for 2026, or • Your includible compensation for your most recent year of service. Although, in general, the same limit applies, church employees can choose an alternative limit and there are changes in how church employees, foreign missionaries, and self-employed ministers figure includible compensation for the most recent year of service. This chapter will explain the alternative limit and the changes. Who is a church employee? A church employee is anyone who is an employee of a church or a convention or association of churches, including an employee of a tax-exempt organization controlled by or associated with a church or a convention or association of churches. Alternative Limit for Church Employees If you are a church employee, you can choose to use $10,000 a year as your limit on annual additions, even if your annual additions figured under the general rule are less. Total contributions over your lifetime under this choice can’t be more than $40,000. Changes to Includible Compensation Includible compensation is figured differently for foreign missionaries and self-employed ministers. Foreign missionary. If you are a foreign missionary, your includible compensation includes foreign earned income that may otherwise be excludable from your gross income under section 911. If you are a foreign missionary, and your adjusted gross income is $17,000 or less, contributions to your 403(b) account won’t be treated as exceeding the limit on annual additions if the contributions aren’t in excess of $3,000. You are a foreign missionary if you are either a layperson or a duly ordained, commissioned, or licensed minister of a church and you meet both of the following requirements. • You are an employee of a church or convention or association of churches. • You are performing services for the church outside the United States. Self-employed minister. If you are a self-employed minister, you are treated as an employee of a tax-exempt organization that is an eligible employer. Your includible compensation is your net earnings from your ministry minus the contributions made to the retirement plan on your behalf and the deductible portion of your self-employment tax. Changes to Years of Service Generally, only service with the employer who maintains your 403(b) account can be counted when figuring your limit on annual additions. Church employee. If you are a church employee, treat all of your years of service as an employee of a church or a convention or association of churches as years of service with one employer. 16 Chapter 5 Ministers and Church Employees Publication 571 (1-2026) Self-employed minister. If you are a self-employed minister, your years of service include full and part years during which you were self-employed. Tip: Catch-up contributions aren’t counted against your MAC. Therefore, the maximum amount that you are allowed to have contributed to your 403(b) account is your MAC plus your allowable catch-up contributions. 6. You can use Worksheet C in chapter 9 to figure your limit on catch-up contributions. Catch-up Contributions The most that can be contributed to your 403(b) account is the lesser of your limit on annual additions or your limit on elective deferrals. If you will be age 50 or older by the end of the year, you may also be able to make additional catch-up contributions. These additional contributions can’t be made with after-tax employee contributions. You are eligible to make catch-up contributions if: • You will have reached age 50 by the end of the year, • Your employer's plan document allows for catch-up contributions, and • The maximum amount of elective deferrals that can be made to your 403(b) account has been made for the plan year. The maximum amount of catch-up contributions is the lesser of: • $x,xxx for 2025 and 2026; or • The excess of your compensation for the year, over the elective deferrals that aren’t catch-up contributions. Starting in 2025, eligible participants who reach the age of 60, 61, 62, or 63 during the tax year may be entitled for further catch-up contributions. Their maximum amount of catch-up contributions is 150% of the applicable dollar-catch-up limit, which is $11,250 for 2025. Figuring catch-up contributions. When figuring allowable catch-up contributions, combine all catch-up contributions made by your employer on your behalf to the following plans. • Qualified retirement plans. (To determine if your plan is a qualified plan, ask your plan administrator.) • 403(b) plans. • SARSEP plans. • SIMPLE plans. 7. Excess Contributions If your actual contributions (not including catch-up contributions) are greater than your MAC, you have an excess contribution. Excess contributions can result in income tax, additional taxes, and penalties. The effect of excess contributions depends on the type of excess contribution. This chapter discusses excess contributions to your 403(b) account. How Do I Know if I Have Excess Contributions? At the end of the year or the beginning of the next year, you should refigure your MAC based on your actual compensation and actual contributions made to your account. If the actual contributions (not including catch-up contributions) to your account are greater than your MAC, you have excess contributions. If, at any time during the year, your employment status or your compensation changes, you should refigure your MAC using a revised estimate of compensation to prevent excess contributions. What Happens if I Have Excess Contributions? Certain excess contributions in a 403(b) account can be corrected. The effect of an excess 403(b) contribution will depend on the type of excess contribution. The total amount of the catch-up contributions on your behalf to all plans maintained by your employer can’t be more than the annual limit. The limit is $x,xxx for 2025 and 2026 if you reach the age of 50 or over but not the age of 60, 61, 62, or 63 during the tax year. If you reach the age of 60, 61, 62, or 63 during the tax year, then your limit is $11,250. Publication 571 (1-2026) Caution: If you are eligible for both the 15-year rule increase in elective deferrals and the age 50 catch-up, allocate amounts first under the 15-year rule and next as an age 50 catch-up. Chapter 6 Types of excess contributions. If, after checking your actual contributions, you determine that you have an excess, the first thing is to identify the type of excess that you have. Excess contributions to a 403(b) account are categorized as either an: • Excess annual addition, or Catch-up Contributions 17 • Excess elective deferral. Excess Annual Addition An excess annual addition is a contribution (not including catch-up contributions) that is more than your limit on annual additions. To determine your limit on annual additions, see chapter 3 (chapter 5 for ministers or church employees). In the year that your contributions are more than your limit on annual additions, the excess amount will be included in your income. Excise Tax If your 403(b) account is a custodial account, and you exceed your limit on annual additions, you may be subject to a 6% excise tax on the excess contribution. The excise tax doesn’t apply to funds in an annuity contract or a retirement income account, or to excess deferrals. You must pay the excise tax each year in which there are excess contributions in your account. Excess contributions can be corrected by contributing less than the applicable limit in later years or by making permissible distributions. See chapter 8 for a discussion on permissible distributions. You can’t deduct the excise tax. Reporting requirement. You must file Form 5330 if there has been an excess contribution to a custodial account and that excess hasn’t been corrected. Excess Elective Deferral An excess elective deferral is the amount that is more than your limit on elective deferrals. To determine your limit on elective deferrals, see chapter 4. Your employer's 403(b) plan may contain language permitting it to distribute excess deferrals. If so, it may require that in order to get a distribution of excess deferrals, you either notify the plan of the amount of excess deferrals or designate a distribution as an excess deferral. The plan may require that the notification or designation be in writing and may require that you certify or otherwise establish that the designated amount is an excess deferral. A plan isn’t required to permit distribution of excess deferrals. Correction of excess deferrals during year. If you have excess deferrals for a year, a corrective distribution may be made only if both of the following conditions are satisfied. • The plan and either you or your employer designate the distribution as an excess deferral to the extent you have excess deferrals for the year. • The correcting distribution is made after the date on which the excess deferral was made. Correction of excess deferrals after the year. If you have excess deferrals for a year, you may receive a cor18 Chapter 8 recting distribution of the excess deferral no later than April 15 of the following year. The plan can distribute the excess deferral (and any income allocable to the excess) no later than April 15 of the year following the year the excess deferral was made. Note: When April 15 falls on a Saturday, Sunday, or legal holiday, a return is considered timely filed if filed on the next succeeding day that isn’t a Saturday, Sunday, or legal holiday. Tax treatment of excess deferrals not attributable to Roth contributions. If the excess deferral is distributed by April 15, it is included in your income in the year contributed and the earnings on the excess deferral will be taxed in the year distributed. Note: When April 15 falls on a Saturday, Sunday, or legal holiday, a return is considered timely filed if filed on the next succeeding day that isn’t a Saturday, Sunday, or legal holiday. Tax treatment of excess deferrals attributable to Roth contributions. For these rules, see Regulations section 1.402(g)-1(e). 8. Distributions and Rollovers Distributions Permissible distributions. Generally, a distribution can’t be made from a 403(b) account until the employee: • Reaches age 591/2; • Has a severance from employment; • Dies; • Becomes disabled; • In the case of elective deferrals, encounters financial hardship; • Has a qualified reservist distribution; • Has a qualified birth or adoption distribution; • Has certain distributions of lifetime income investments; • Has an emergency personal expenses distribution; • Has a domestic abuse distribution; or • Has a qualified disaster recovery distribution. Distributions and Rollovers Publication 571 (1-2026) In most cases, the payments you receive or that are made available to you under your 403(b) account are taxable in full as ordinary income. In general, the same tax rules apply to distributions from 403(b) plans that apply to distributions from other retirement plans. These rules are explained in Pub. 575. Pub. 575 also discusses the additional tax on early distributions from retirement plans. Retired public safety officers. If you are an eligible retired public safety officer, you can exclude from your gross income distributions of up to $3,000 made from your 403(b) plan that are used to pay the premiums for coverage by an accident or health plan, or a long-term care insurance contract. The premiums can be for you, your spouse, or your dependents. The distribution can be made directly from the plan to the provider of the accident or health plan or long-term care insurance contract, or the distribution can be made to you to pay to the provider of the accident or health plan or long-term care insurance contract. A public safety officer is a law enforcement officer, fire fighter, chaplain, or member of a rescue squad or ambulance crew. For additional information, see Pub. 575. Distribution for active reservist. The 10% additional tax for early withdrawals won’t apply to a qualified reservist distribution attributable to elective deferrals from a 403(b) plan. A qualified reservist distribution is a distribution that is made: • To an individual who is a reservist or national guardsman and who was ordered or called to active duty for a period in excess of 179 days or for an indefinite period, and • During the period beginning on the date of the order or call to duty and ending at the close of the active duty period. Minimum Required Distributions You must receive all, or at least a certain minimum, of your interest accruing after 1986 in the 403(b) plan by April 1 of the calendar year following the later of the calendar year in which you reach age 73 (if you reach age 72 after December 31, 2022), or the calendar year in which you retire. Tip: Check with your employer, plan administrator, or provider to find out whether this rule also applies to pre-1987 accruals. If not, a minimum amount of these accruals must begin to be distributed by the later of the end of the calendar year in which you reach age 75 or April 1 of the calendar year following retirement. For each year thereafter, the minimum distribution must be made by the last day of the year. If you don’t receive the required minimum distribution, you are subject to a nondeductible 25% (or 10% if corrected by a specified time) excise tax on the difference between the required minimum distribution and the amount actually distributed. Publication 571 (1-2026) Chapter 8 No Special 10-Year Tax Option A distribution from a 403(b) plan doesn’t qualify as a lump-sum distribution. This means you can’t use the special 10-year tax option to figure the taxable portion of a 403(b) distribution. For more information, see Pub. 575. Transfer of Interest in 403(b) Contract Contract exchanges. If you transfer all or part of your interest from a 403(b) contract to another 403(b) contract (held in the same plan), the transfer is tax free, and is referred to as a “contract exchange.” This was previously known as a 90-24 transfer. A contract exchange is similar to a 90-24 transfer with one major difference. Previously, you were able to accomplish the transfer without your employer’s involvement. After September 24, 2007, all such transfers are accomplished through a contract exchange requiring your employer’s involvement. In addition, the plan must provide for the exchange and the transferred interest must be subject to the same or stricter distribution restrictions. Finally, your accumulated benefit after the exchange must be equal to what it was before the exchange. Transfers that don’t satisfy this rule are plan distributions and are generally taxable as ordinary income. Plan-to-plan transfers. You may also transfer part or all of your interest from a 403(b) plan to another 403(b) plan if you are an employee of (or were formerly employed by) the employer of the plan to which you would like to transfer. Both the initial plan and the receiving plan must provide for transfers. Your accumulated benefit after the transfer must be at least equal to what it was before the transfer. The new plan’s restrictions on distributions must be the same or stricter than those of the original plan. Tax-free transfers for certain cash distributions. A tax-free transfer may also apply to a cash distribution of your 403(b) account from an insurance company that is subject to a rehabilitation, conservatorship, insolvency, or similar state proceeding. To receive tax-free treatment, you must do all of the following. • Withdraw all the cash to which you are entitled in full settlement of your contract rights or, if less, the maximum permitted by the state. • Reinvest the cash distribution in a single policy or contract issued by another insurance company or in a single custodial account subject to the same or stricter distribution restrictions as the original contract not later than 60 days after you receive the cash distribution. • Assign all future distribution rights to the new contract or account for investment in that contract or account if you received an amount that is less than what you are entitled to because of state restrictions. Distributions and Rollovers 19 In addition to the preceding requirements, you must provide the new insurer with a written statement containing all of the following information. • The gross amount of cash distributed under the old contract. • The amount of cash reinvested in the new contract. • Your investment in the old contract on the date you receive your first cash distribution. Also, you must attach the following items to your timely filed income tax return in the year you receive the first distribution of cash. 1. A copy of the statement you gave the new insurer. 2. A statement that includes: a. The words ELECTION UNDER REV. PROC. 92-44, b. The name of the company that issued the new contract, and c. The new policy number. Direct trustee-to-trustee transfer. If you make a direct trustee-to-trustee transfer from your governmental 403(b) account to a defined benefit governmental plan, it may not be includible in gross income. The transfer amount isn’t includible in gross income if it is made to: • Purchase permissive service credits; or • Repay contributions and earnings that were previously refunded under a forfeiture of service credit under the plan, or under another plan maintained by a state or local government employer within the same state. After-tax contributions. For distributions beginning after December 31, 2006, after-tax contributions can be rolled over between a 403(b) plan and a defined benefit plan, an IRA, or a defined contribution plan. If the rollover is to or from a 403(b) plan, it must occur through a direct trustee-to-trustee transfer. Permissive service credit. A permissive service credit is credit for a period of service recognized by a defined benefit governmental plan only if you voluntarily contribute to the plan an amount that doesn’t exceed the amount necessary to fund the benefit attributable to the period of service and the amount contributed is in addition to the regular employee contribution, if any, under the plan. A permissive service credit may also include service credit for up to 5 years where there is no performance of service, or service credited to provide an increased benefit for service credit which a participant is receiving under the plan. Check with your plan administrator as to the type and extent of service that may be purchased by this transfer. 20 Chapter 8 Tax-Free Rollovers You can generally roll over tax free all or any part of a distribution from a 403(b) plan to a traditional IRA or a non-Roth eligible retirement plan, except for any nonqualifying distributions, described later. You may also roll over any part of a distribution from a 403(b) plan by converting it through a direct rollover, described below, to a Roth IRA. Conversion amounts are generally includible in your taxable income in the year of the distribution from your 403(b) account. See Pub. 590-A for more information about conversion into a Roth IRA. Note: A participant is required to roll over distribution amounts received within 60 calendar days in order for the amount to be treated as nontaxable. Distribution amounts that are rolled over within the 60 days aren’t subject to the 10% additional tax on early distributions. Note: The repayment of a qualified birth or adoption distribution, an emergency personal expense distribution, or a distribution to a domestic abuse victim from an applicable eligible retirement plan is treated as a direct transfer of the distribution to the plan within 60 days of the distribution. Rollovers to and from 403(b) plans. You can generally roll over tax free all or any part of a distribution from an eligible retirement plan to a 403(b) plan. Beginning January 1, 2008, distributions from tax-qualified retirement plans and tax-sheltered annuities can be converted by making a direct rollover into a Roth IRA subject to the restrictions that currently apply to rollovers from a traditional IRA into a Roth IRA. Converted amounts are generally includible in your taxable income in the year of the distribution from your 403(b) account. See Pub. 590-A for more information on conversion into a Roth IRA. If a distribution includes both pre-tax contributions and after-tax contributions, the portion of the distribution that is rolled over is treated as consisting first of pre-tax amounts (contributions and earnings that would be includible in income if no rollover occurred). This means that if you roll over an amount that is at least as much as the pre-tax portion of the distribution, you don’t have to include any of the distribution in income. For more information on rollovers and eligible retirement plans, see Pub. 575. Caution: If you roll over money or other property from a 403(b) plan to an eligible retirement plan, see Pub. 575 for information about possible effects on later distributions from the eligible retirement plan. Hardship exception to rollover rules. The IRS may waive the 60-day rollover period if the failure to waive such requirement would be against equity or good conscience, including cases of casualty, disaster, or other events beyond the reasonable control of an individual. Distributions and Rollovers Publication 571 (1-2026) Ways to get a waiver of the 60-day rollover requirement. There are three ways to obtain a waiver of the 60-day rollover requirement. • You qualify for an automatic waiver. • You self-certify that you met the requirements of a • You request and receive a private letter ruling granting a waiver. How do you qualify for an automatic waiver? You qualify for an automatic waiver if all of the following apply. • The financial institution receives the funds on your behalf before the end of the 60-day rollover period. • You followed all of the procedures set by the financial institution for depositing the funds into an IRA or other eligible retirement plan within the 60-day rollover period (including giving instructions to deposit the funds into a plan or IRA). • The funds are not deposited into a plan or IRA within the 60-day rollover period solely because of an error on the part of the financial institution. • The funds are deposited into a plan or IRA within 1 year from the beginning of the 60-day rollover period. • It would have been a valid rollover if the financial institution had deposited the funds as instructed. If you do not qualify for an automatic waiver, you can use the self-certification procedure to make a late rollover contribution or you can apply to the IRS for a waiver of the 60-day rollover requirement. How do you self-certify that you qualify for a waiver? Based on Revenue Procedure 2016-47, 2016-37 I.R.B. 346, available at IRS.gov/irb/2016-37_IRB/ ar09.html, you may make a written certification to a plan administrator or an IRA trustee that you missed the 60-day rollover contribution deadline because of one or more of the 11 reasons listed in Revenue Procedure 2016-47. A plan administrator or an IRA trustee may rely on the certification in accepting and reporting receipt of the rollover contribution. You may make the certification by using the model letter in the appendix to the revenue procedure or by using a letter that is substantially similar. There is no IRS fee for self certification. A copy of the certification should be kept in your files and be available if requested on audit. For additional information on rollovers, see Pub. 590-A. How do you apply for a waiver ruling and what is the fee? You can request a ruling according to the procedures outlined in Revenue Procedure 2003-16, as modified by Revenue Procedure 2016-47 and Revenue Procedure 2020-46; and Revenue Procedure 2026-4. See Appendix A for the applicable user fee. How does the IRS determine whether to grant a waiver in a private letter ruling? In determining whether to issue a favorable letter ruling granting a waiver, Chapter 8 • Whether errors were made by the financial institution, that is, the plan administrator, or IRA trustee, issuer, or custodian; waiver. Publication 571 (1-2026) the IRS will consider all of the relevant facts and circumstances, including: • Whether you were unable to complete the rollover within the 60-day period due to death, disability, hospitalization, incarceration, serious illness, restrictions imposed by a foreign country, or postal error; • Whether you used the amount distributed; and • How much time has passed since the date of the distribution. Note: The IRS can waive only the 60-day rollover requirement and not the other requirements for a valid rollover contribution. For more information on waivers of the 60-day rollover requirement, go to IRS.gov/Retirement-Plans/RetirementPlans-FAQS-Relating-to-Waivers-of-the-60-Day-RolloverRequirement. Eligible retirement plans. The following are considered eligible retirement plans. • IRAs. • Roth IRAs. • 403(a) annuity plans. • 403(b) plans. • Government eligible 457 plans. • Qualified retirement plans. If the distribution is from a designated Roth account, then the only eligible retirement plan is another designated Roth account or a Roth IRA. Nonqualifying distributions. You can’t roll over tax free: • Minimum required distributions (generally required to begin at age 73 if you reach age 72 after December 31, 2022); • Substantially equal payments over your life or life expectancy; • Substantially equal payments over the joint lives or life expectancies of your beneficiary and you; • Substantially equal payments for a period of 10 years or more; • Hardship distributions; or • Corrective distributions of excess contributions or excess deferrals, and any income allocable to the excess, or excess annual additions and any allocable gains. Rollover of nontaxable amounts. You may be able to roll over the nontaxable part of a distribution (such as your after-tax contributions) made to another eligible retirement plan, traditional IRA, or Roth IRA. The transfer must be Distributions and Rollovers 21 made either through a direct rollover to an eligible plan that separately accounts for the taxable and nontaxable parts of the rollover or through a rollover to a traditional IRA or Roth IRA. If you roll over only part of a distribution that includes both taxable and nontaxable amounts, the amount you roll over is treated as coming first from the taxable part of the distribution. Direct rollovers of 403(b) plan distributions. You have the option of having your 403(b) plan make the rollover directly to a traditional IRA, Roth IRA, or new plan. Before you receive a distribution, your plan will give you information on this. It is generally to your advantage to choose this option because your plan won’t withhold tax on the distribution if you choose it. Distribution received by you. If you receive a distribution that qualifies to be rolled over, you can roll over all or any part of the distribution. Generally, you will receive only 80% of the distribution because 20% must be withheld. If you roll over only the 80% you receive, you must pay tax on the 20% you didn’t roll over. You can replace the 20% that was withheld with other money within the 60-day period to make a 100% rollover. Voluntary deductible contributions. For tax years 1982 through 1986, employees could make deductible contributions to a 403(b) plan under the IRA rules instead of deducting contributions to a traditional IRA. If you made voluntary deductible contributions to a 403(b) plan under these traditional IRA rules, the distribution of all or part of the accumulated deductible contributions may be rolled over if it otherwise qualifies as a distribution you can roll over. Accumulated deductible contributions are the deductible contributions: • Plus: an employee's spouse or former spouse under a QDRO, all of the rollover rules apply to you as if you were the employee. You can roll over your interest in the plan to a traditional IRA or another 403(b) plan. For more information on the treatment of an interest received under a QDRO, see Pub. 575. Spouses of deceased employees. If you are the spouse of a deceased employee, you can roll over the qualifying distribution attributable to the employee. You can make the rollover to any eligible retirement plan. After you roll money and other property over from a 403(b) plan to an eligible retirement plan, and you take a distribution from that plan, you won’t be eligible to receive the capital gain treatment or the special averaging treatment for the distribution. Second rollover. If you roll over a qualifying distribution to a traditional IRA, you can, if certain conditions are satisfied, later roll the distribution into another 403(b) plan. For more information, see IRA as a holding account (conduit IRA) for rollovers to other eligible plans in chapter 1 of Pub. 590-A. Nonspouse beneficiary. A nonspouse beneficiary may make a direct rollover of a distribution from a 403(b) plan of a deceased participant if the rollover is a direct transfer to an inherited IRA established to receive the distribution. If the rollover is a direct trustee-to-trustee transfer to an IRA established to receive the distribution: • The transfer will be treated as an eligible rollover distribution, • The IRA will be considered an inherited account, and • The required minimum distribution rules that apply in instances where the participant dies before the entire interest is distributed will apply to the transferred IRA. For more information on IRAs, see Pubs. 590-A and 590-B. 1. Income allocable to the contributions, 2. Gain allocable to the contributions, and • Minus: 1. Expenses and losses allocable to the contributions; and 2. Distributions from the contributions, income, or gain. Frozen deposits. The 60-day period usually allowed for completing a rollover is extended for any time that the amount distributed is a frozen deposit in a financial institution. The 60-day period can’t end earlier than 10 days after the deposit ceases to be a frozen deposit. A frozen deposit is any deposit that on any day during the 60-day period can’t be withdrawn because: 1. The financial institution is bankrupt or insolvent, or Excess employer contributions. The portion of a distribution from a 403(b) plan transferred to a traditional IRA that was previously included in income as excess employer contributions isn’t an eligible rollover distribution. Its transfer doesn’t affect the rollover treatment of the eligible portion of the transferred amounts. However, the ineligible portion is subject to the traditional IRA contribution limits and may create an excess IRA contribution subject to a 6% excise tax. See chapter 1 of Pub. 590-A. Gift Tax Qualified domestic relations order (QDRO). You may be able to roll over tax free all or any part of an eligible rollover distribution from a 403(b) plan that you receive under a QDRO. If you receive the interest in the 403(b) plan as If, by choosing or not choosing an election, or option, you provide an annuity for your beneficiary at or after your death, you may have made a taxable gift equal to the value of the annuity. 22 Chapter 8 2. The state where the institution is located has placed limits on withdrawals because one or more banks in the state are (or are about to be) bankrupt or insolvent. Distributions and Rollovers Publication 571 (1-2026) Joint and survivor annuity. If the gift is an interest in a joint and survivor annuity where only you and your spouse have the right to receive payments, the gift will generally be treated as qualifying for the unlimited marital deduction. More information. For information on the gift tax, see Pub. 559, Survivors, Executors, and Administrators. 9. When Should I Figure My MAC? At the beginning of each year, you should figure your MAC using a conservative estimate of your compensation. Should your income change during the year, you should refigure your MAC based on a revised conservative estimate. By doing this, you will be able to determine if contributions to your 403(b) account should be increased or decreased for the year. Checking the Previous Year's Contributions Worksheets Chapter 2 introduced you to the term “maximum amount contributable” (MAC). Generally, your MAC is the lesser of your: • Limit on annual additions (chapter 3), or • Limit on elective deferrals (chapter 4). The worksheets in this chapter can help you figure the cost of incidental life insurance, your includible compensation, your limit on annual additions, your limit on elective deferrals, your limit on catch-up contributions, and your MAC. After completing the worksheets, you should maintain them with your 403(b) records for that year. Do not attach them to your tax return. At the end of the year or the beginning of the next year, you should compare your estimated compensation figures with your actual figures. If your compensation is the same as, or more than, the projected amounts and the calculations are correct, then you should simply file these worksheets with your other tax records for the year. At the beginning of the following year, you should refigure your MAC based on your actual earned income. At the end of the current year or the beginning of the next year, you should check your contributions to be sure you didn’t exceed your MAC. This means refiguring your limit based on your actual compensation figures for the year. This will allow you to determine if the amount contributed is more than the allowable amounts, and possibly avoid additional taxes. Available Worksheets The following worksheets have been provided to help you figure your MAC. • Worksheet A. Cost of Incidental Life Insurance. • Worksheet B. Includible Compensation for Your Most Recent Year of Service. • Worksheet C. Limit on Catch-up Contributions. • Worksheet 1. Maximum Amount Contributable (MAC). If your compensation was lower than your estimated figures, you will need to check the amount contributed during the year to determine if contributions are more than your MAC. Worksheet A. Cost of Incidental Life Insurance Note: Use this worksheet to figure the cost of incidental life insurance included in your annuity contract. This amount will be used to figure includible compensation for your most recent year of service. 1. Enter the value of the contract (amount payable upon your death) . . . . . . . . . . . . . . . . . . . . . . . . . 1. 2. Enter the cash value in the contract at the end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. 3. Subtract line 2 from line 1. This is the value of your current life insurance protection . . . . . . . . . . . 3. 4. Enter your age on your birthday nearest the beginning of the policy year . . . . . . . . . . . . . . . . . . . . 4. 5. Enter the 1-year term premium for $1,000 of life insurance based on your age. (From Figure 3-1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. 6. Divide line 3 by $1,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. 7. Multiply line 6 by line 5. This is the cost of your incidental life insurance . . . . . . . . . . . . . . . . . . . . . 7. Publication 571 (1-2026) Chapter 9 Worksheets 23 Worksheet B. Includible Compensation for Your Most Recent Year of Service1 Note: Use this worksheet to figure includible compensation for your most recent year of service. 1 2 1. Enter your includible wages from the employer maintaining your 403(b) account for your most recent year of service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. 2. Enter elective deferrals excluded from your gross income for your most recent year of service2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. 3. Enter amounts contributed or deferred by your employer under a cafeteria plan for your most recent year of service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. 4. Enter amounts contributed or deferred by your employer according to your election to your 457 account (a nonqualified plan of a state or local government or of a tax-exempt organization) for your most recent year of service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. 5. Enter pre-tax contributions (employer's contributions made on your behalf according to your election) to a qualified transportation fringe benefit plan for your most recent year of service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. 6. Enter your foreign earned income exclusion for your most recent year of service . . . . . . . . . . . 6. 7. Add lines 1, 2, 3, 4, 5, and 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. 8. Enter the cost of incidental life insurance that is part of your annuity contract for your most recent year of service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. 9. Enter compensation that was both: • Earned during your most recent year of service, and • Earned while your employer wasn’t qualified to maintain a 403(b) plan . . . . . . . . . . . . . . . . 9. 10. Add lines 8 and 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. 11. Subtract line 10 from line 7. This is your includible compensation for your most recent year of service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. Use estimated amounts if figuring includible compensation before the end of the year. Elective deferrals made to a designated Roth account aren’t excluded from your gross income and shouldn’t be included on this line. Worksheet C. Limit on Catch-up Contributions Note: If you will be age 50 or older by the end of the year, use this worksheet to figure your limit on catch-up contributions. 24 1. Maximum catch-up contributions if you will be age 50 or older by the end of the year, but not 60, 61, 62, or 63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. $x,xxx 2. Maximum catch-contributions if you will be age 60, 61, 62, or 63 by the end of the year . . . . . . . . 2. $11,250 3. Enter your includible compensation for your most recent year of service . . . . . . . . . . . . . . . . . . . . 3. 4. Enter your elective deferrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. 5. Subtract line 3 from line 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. 6. Enter the lesser of line 1 or line 5 if you will be age 50 or over by the end of the year, but not 60, 61, 62, or 63. If you will be age 60, 61, 62, or 63 by the end of the year, enter the lesser of line 2 or line 5. This is your limit on catch-up contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Chapter 9 Worksheets Publication 571 (1-2026) Worksheet 1. Maximum Amount Contributable (MAC) Note: Use this worksheet to figure your MAC. Part I. Limit on Annual Additions 1. Enter your includible compensation for your most recent year of service . . . . . . . . . . . . . . . . . . 1. 2. Maximum: • For 2025, enter $70,000. • For 2026, enter $72,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. 3. Enter the lesser of line 1 or line 2. This is your limit on annual additions . . . . . . . . . . . . . . . . . . 3. 1 Caution: If you had only nonelective contributions, skip Part II and enter the amount from line 3 on line 18. Part II. Limit on Elective Deferrals 4. Maximum contribution: • For 2025, enter $23,500. • For 2026, enter $24,500 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Note: If you have at least 15 years of service with a qualifying organization, complete lines 5 through 17. If not, enter zero (-0-) on line 16 and go to line 17. 5. Amount per year of service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. 6. Enter your years of service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. 7. Multiply line 5 by line 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. 8. Enter the total of all elective deferrals made for you by the qualifying organization for prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. 9. Subtract line 8 from line 7. If zero or less, enter zero (-0-) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. 10. Maximum increase in limit for long service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. 11. Enter the total of additional pre-tax elective deferrals made in prior years under the 15-year rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. 12. Enter the aggregate amount of all designated Roth contributions permitted for prior years under the 15-year rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. 13. Add line 11 and line 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13. 14. Subtract line 13 from line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14. 15. Maximum additional contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15. 16. Enter the least of line 9, line 14, or line 15. This is your increase in the limit for long service . . . . 16. 17. Add lines 4 and 16. This is your limit on elective deferrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17. $ 5,000 $15,000 $ 3,000 Part III. Maximum Amount Contributable 18. • If you had only nonelective contributions, enter the amount from line 3. This is your MAC. • If you had only elective deferrals, enter the lesser of line 3 or line 17. This is your MAC. • If you had both elective deferrals and nonelective contributions, enter the amount from line 3. This is your MAC. (Use the amount on line 17 to determine if you have excess elective deferrals as explained in chapter 7.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18. If you participate in a 403(b) plan and a qualified plan, you must combine contributions made to your 403(b) account with contributions to a qualified plan and simplified employee pension plans of all corporations, partnerships, and sole proprietorships in which you have more than 50% control. You must also combine the contributions made to all 403(b) accounts on your behalf by your employer. 1 Publication 571 (1-2026) Chapter 9 Worksheets 25 • Foreign housing costs; • Income for bona fide residents of American Samoa, 10. Guam, or the Northern Mariana Islands; and • Income from Puerto Rico. Retirement Savings Contributions Credit (Saver's Credit) Eligible contributions. These include: 1. Contributions to a traditional or Roth IRA; 2. Elective deferrals, including amounts designated as after-tax Roth contributions, to: If you or your employer makes eligible contributions (defined later) to a retirement plan, you may be able to take a credit of up to $2,000 (up to $4,000 if filing jointly). This credit could reduce the federal income tax you pay dollar for dollar. Can you claim the credit? If you or your employer makes eligible contributions to a retirement plan, you can claim the credit if all of the following apply. 1. You aren’t under age 18. 2. You aren’t a full-time student (explained next). 3. No one else, such as your parent(s), claims an exemption for you on their tax return. 4. Your adjusted gross income (defined later) isn’t more than: a. $79,000 for 2025 ($80,500 for 2026) if your filing status is married filing jointly; b. $59,250 for 2025 ($60,375 for 2026) if your filing status is head of household (with qualifying person); or c. $39,500 for 2025 ($40,250 for 2026) if your filing status is single, married filing separately, or qualifying surviving spouse with dependent child. Full-time student. You are a full-time student if, during some part of each of 5 calendar months (not necessarily consecutive) during the calendar year, you are either: • A full-time student at a school that has a regular teaching staff, course of study, and regularly enrolled body of students in attendance; or • A student taking a full-time, on-farm training course given by either a school that has a regular teaching staff, course of study, and regularly enrolled body of students in attendance; or a state, county, or local government. You are a full-time student if you are enrolled for the number of hours or courses the school considers to be full-time. Adjusted gross income. This is generally the amount on line 11a of your 2025 Form 1040 or 1040-SR. For purposes of this section, adjusted gross income shall be determined without regard to sections 911, 931, and 933. You must add to that amount any exclusion or deduction from gross income claimed for the year for: • Foreign earned income; 26 Chapter 10 a. A 401(k) plan (including a SIMPLE 401(k) plan), b. A section 403(b) annuity, c. An eligible deferred compensation plan of a state or local government (a governmental 457 plan), d. A SIMPLE IRA plan, or e. A SARSEP plan; 3. Contributions to a section 501(c)(18) plan; and 4. ABLE account contributions by the designated beneficiary as defined by section 529A. They also include voluntary after-tax employee contributions to a tax-qualified retirement plan or a section 403(b) annuity. For purposes of the credit, an employee contribution will be voluntary as long as it isn’t required as a condition of employment. Reducing eligible contributions. Reduce your eligible contributions (but not below zero) by the total distributions you received during the testing period (defined later) from any IRA, plan, or annuity included earlier under Eligible contributions. Also, reduce your eligible contributions by any distribution from a Roth IRA that isn’t rolled over, even if the distribution isn’t taxable. Do not reduce your eligible contributions by any of the following. 1. The portion of any distribution which isn’t includible in income because it is a trustee-to-trustee transfer or a rollover distribution. 2. Distributions that are taxable as the result of an in-plan rollover to your designated Roth account. 3. Any distribution that is a return of a contribution to an IRA (including a Roth IRA) made during the year for which you claim the credit if: a. The distribution is made before the due date (including extensions) of your tax return for that year, b. You don’t take a deduction for the contribution, and c. The distribution includes any income attributable to the contribution. 4. Loans from a qualified employer plan treated as a distribution. 5. Distributions of excess contributions or deferrals (and income attributable to excess contributions and deferrals). Retirement Savings Contributions Credit (Saver's Credit) Publication 571 (1-2026) 6. Distributions of dividends paid on stock held by an employee stock ownership plan under section 404(k). 7. Distributions from an eligible retirement plan that are converted or rolled over to a Roth IRA. 8. Distributions from a military retirement plan. 9. Distributions from an inherited IRA by a nonspousal beneficiary. Distributions received by spouse. Any distributions your spouse receives are treated as received by you if you file a joint return with your spouse both for the year of the distribution and for the year for which you claim the credit. Testing period. The testing period consists of: • The year in which you claim the credit, • The 2 years before the year in which you claim the credit, and • The period after the end of the year in which you claim the credit and before the due date of the return (including extensions) for filing your return for the year in which you claimed the credit. Example. You and your spouse filed joint returns in 2023 and 2024, and plan to do so in 2025 and 2026. You received a taxable distribution from a qualified plan in 2023 and a taxable distribution from an eligible section 457(b) deferred compensation plan in 2024. Your spouse received taxable distributions from a Roth IRA in 2025 and tax-free distributions from a Roth IRA in 2026 before April 15. You made eligible contributions to an IRA in 2025 and you otherwise qualify for this credit. You must reduce the amount of your qualifying contributions in 2025 by the total of the distributions you and your spouse received in 2023, 2024, 2025, and 2026. Maximum eligible contributions. After your contributions are reduced, the maximum annual contribution on which you can base the credit is $2,000 per person. Effect on other credits. The amount of this credit won’t change the amount of your refundable tax credits. A refundable tax credit, such as the earned income credit or the additional child tax credit, is an amount that you would receive as a refund even if you didn’t otherwise owe any taxes. Maximum credit. This is a nonrefundable credit. The amount of the credit in any year can’t be more than the amount of tax that you would otherwise pay (not counting any refundable credits or the adoption credit) in any year. If your tax liability is reduced to zero because of other nonrefundable credits, such as the education credits, then you won’t be entitled to this credit. How to figure and report the credit. The amount of the credit you can get is based on the contributions you make and your credit rate. The credit rate can be as low as 10% or as high as 50%. Your credit rate depends on your income and your filing status. See Form 8880 to determine your credit rate. Publication 571 (1-2026) The maximum contribution taken into account is $2,000 per person. On a joint return, up to $2,000 is taken into account for each spouse. Figure the credit on Form 8880. Report the credit on line 4 of your 2025 Schedule 3 (Form 1040) and attach Form 8880 to your return. How To Get Tax Help If you have questions about a tax issue; need help preparing your tax return; or want to download free publications, forms, or instructions, go to IRS.gov to find resources that can help you right away. Tax reform. Tax reform legislation impacting federal taxes, credits, and deductions was enacted in P.L. 119-21, commonly known as the One Big Beautiful Bill Act on July 4, 2025. Go to IRS.gov/OBBB for more information and updates on how the legislation affects your taxes. Preparing and filing your tax return. After receiving all your wage and earnings statements (Forms W-2, W-2G, 1099-R, 1099-MISC, 1099-NEC, etc.); unemployment compensation statements (by mail or in a digital format) or other government payment statements (Form 1099-G); and interest, dividend, and retirement statements from banks and investment firms (Forms 1099), you have several options to choose from to prepare and file your tax return. You can prepare the tax return yourself, see if you qualify for free tax preparation, or hire a tax professional to prepare your return. Free options for tax preparation. Your options for preparing and filing your return online or in your local community, if you qualify, include the following. • Free File. This program lets you prepare and file your federal individual income tax return for free using software or Free File Fillable Forms. However, state tax preparation may not be available through Free File. Go to IRS.gov/FreeFile to see if you qualify for free online federal tax preparation, e-filing, and direct deposit or payment options. • VITA. The Volunteer Income Tax Assistance (VITA) program offers free tax help to people with low-to-moderate incomes, persons with disabilities, and limited-English-speaking taxpayers who need help preparing their own tax returns. Go to IRS.gov/ VITA, download the free IRS2Go app, or call 800-906-9887 for information on free tax return preparation. • TCE. The Tax Counseling for the Elderly (TCE) pro- gram offers free tax help for all taxpayers, particularly those who are 60 years of age and older. TCE volunteers specialize in answering questions about pensions and retirement-related issues unique to seniors. Go to IRS.gov/TCE or download the free IRS2Go app for information on free tax return preparation. • MilTax. Members of the U.S. Armed Forces and qualified veterans may use MilTax, a free tax service 27 offered by the Department of Defense through Military OneSource. For more information, go to MilitaryOneSource (MilitaryOneSource.mil/MilTax). Also, the IRS offers Free Fillable Forms, which can be completed online and then e-filed regardless of income. Using online tools to help prepare your return. Go to IRS.gov/Tools for the following. • The Earned Income Tax Credit Assistant (IRS.gov/ EITCAssistant) determines if you’re eligible for the earned income credit (EITC). • The Online EIN Application (IRS.gov/EIN) helps you get an employer identification number (EIN) at no cost. • The Tax Withholding Estimator (IRS.gov/W4app) makes it easier for you to estimate the federal income tax you want your employer to withhold from your paycheck. This is tax withholding. See how your withholding affects your refund, take-home pay, or tax due. • The Sales Tax Deduction Calculator (IRS.gov/ SalesTax) figures the amount you can claim if you itemize deductions on Schedule A (Form 1040). Getting answers to your tax questions. On IRS.gov, you can get up-to-date information on current events and changes in tax law. • IRS.gov/Help: A variety of tools to help you get answers to some of the most common tax questions. more information on how to choose a tax preparer, go to Tips for Choosing a Tax Preparer on IRS.gov. Employers can register to use Business Services Online. The Social Security Administration (SSA) offers online service at SSA.gov/employer for fast, free, and secure online W-2 filing options to CPAs, accountants, enrolled agents, and individuals who process Form W-2, Wage and Tax Statement; and Form W-2c, Corrected Wage and Tax Statement. Business tax account. If you are a sole proprietor, a partnership, an S corporation, a C corporation, or a single-member limited liability company (LLC), you can view your tax information on record with the IRS and do more with a business tax account. Go to IRS.gov/ BusinessAccount for more information. IRS social media. Go to IRS.gov/SocialMedia to see the various social media tools the IRS uses to share the latest information on tax changes, scam alerts, initiatives, products, and services. At the IRS, privacy and security are our highest priority. We use these tools to share public information with you. Don’t post your social security number (SSN) or other confidential information on social media sites. Always protect your identity when using any social networking site. The following IRS YouTube channels provide short, informative videos on various tax-related topics in English, Spanish, and ASL. • IRS.gov/ITA: The Interactive Tax Assistant, a tool that • Youtube.com/irsvideos. • Youtube.com/irsvideosASL. • IRS.gov/Forms: Find forms, instructions, and publica- Online tax information in other languages. You can find information on IRS.gov/MyLanguage if English isn’t your native language. will ask you questions and, based on your input, provide answers on a number of tax law topics. tions. You will find details on the most recent tax changes and interactive links to help you find answers to your questions. • You may also be able to access tax law information in your e-filing software. Need someone to prepare your tax return? There are various types of tax return preparers, including enrolled agents, certified public accountants (CPAs), accountants, [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3Acc6d1713a0389c2d. Public record. Not legal advice.