§833. Inflation indexing of gross income limitations on certain retirement savings incentives

Pension Protection Act of 2006

Title VIII Pension Related Revenue Provisions

Subtitle C Improvements in Portability, Distribution, and Contribution Rules

(a) SAVER'S CREDIT.-Subsection (b) of section 25B of the Internal Revenue Code of 1986 is amended to read as follows:

"(b) APPLICABLE PERCENTAGE.- For purposes of this section-

"(1) JOINT RETURNS.-In the case of a joint return, the applicable percentage is-

"(A) if the adjusted gross income of the taxpayer is not over $30,000, 50 percent,

"(B) if the adjusted gross income of the taxpayer is over $30,000 but not over $32,500, 20 percent,

"(C) if the adjusted gross income of the taxpayer is over $32,500 but not over $50,000, 10 percent, and

"(D) if the adjusted gross income of the taxpayer is over $50,000, zero percent.

"(2) OTHER RETURNS.- In the case of-

"(A) a head of household, the applicable percentage shall be determined under paragraph (1) except that such paragraph shall be applied by substituting for each dollar amount therein (as adjusted under paragraph (3)) a dollar amount equal to 75 percent of such dollar amount, and

"(B) any taxpayer not described in paragraph (1) or subparagraph (A), the applicable percentage shall be determined under paragraph (1) except that such paragraph shall be applied by substituting for each dollar amount therein (as adjusted under paragraph (3)) a dollar amount equal to 50 percent of such dollar amount.

"(3) INFLATION ADJUSTMENT.-In the case of any taxable year beginning in a calendar year after 2006, each of the dollar amounts in paragraph (1) shall be increased by an amount equal to-

"(A) such dollar amount, multiplied by

"(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting 'calendar year 2005' for 'calendar year 1992' in subparagraph (B) thereof.

Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $500. ".

(b) DEDUCTION OF RETIREMENT CONTRIBUTIONS FOR ACTIVE PARTICIPANTS.-Section 219(g) of such Code is amended by adding at the end the following new paragraph:

"(8) INFLATION ADJUSTMENT.-In the case of any taxable year beginning in a calendar year after 2006, the dollar amount in the last row of the table contained in paragraph (3 )(B)(i), the dollar amount in the last row of the table contained in paragraph (3)(B)(ii), and the dollar amount contained in paragraph (7)(A), shall each be increased by an amount equal to-

"(A) such dollar amount, multiplied by

"(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting 'calendar year 2005' for 'calendar year 1992' in subparagraph (B) thereof.

Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $1,000. ".

(c) CONTRIBUTION LIMITATION FOR ROTH IRAS.-Section 408A(c)(3) of such Code is amended by adding at the end the following new subparagraph:

"(C) INFLATION ADJUSTMENT.-In the case of any taxable year beginning in a calendar year after 2006, the dollar amounts in subclauses (I) and (II) of subparagraph (C)(ii) shall each be increased by an amount equal to-

"(i) such dollar amount, multiplied by

"(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting 'calendar year 2005' for 'calendar year 1992' in subparagraph (B) thereof.

Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $1,000. ".

(d) EFFECTIVE DATE.- The amendments made by this section shall apply to taxable years beginning after 2006.