As we begin wrapping up the 2022 tax year and planning for 2023, we wanted to make note of the announcements the IRS recently made for the 2023 tax year. In a year that was highlighted by soaring inflation putting pressure on taxpayers and their families, the IRS made unprecedented changes to the retirement plan limits and raised the income thresholds for each tax bracket. The government hopes to stimulate economic activity by allowing Americans to keep more of their earnings and increase their retirement contributions. Here are the important changes to know going in to the New Year:
Retirement Plan Limits
| 2023 Limits | 2022 Limits | |
| 401(k)/403(b)/457(b) Elective Deferrals | $22,500 | $20,500 |
| Traditional and Roth IRA | $6,500 | $6,000 |
| Catch-Up Contribution (plans other than SIMPLE plans) | $7,500 | $6,500 |
| SIMPLE Plan Employee Deferrals | $15,500 | $14,000 |
| SIMPLE Plan Catch-Up Contributions | $3,500 | $3,000 |
| Plan Maximum Annual Contribution – Defined Contribution Plans | $66,000 | $61,000 |
| Maximum Annual Benefit – Defined Benefit Plans | $265,000 | $245,000 |
| Compensation Limit under Section 401(a)(17) | $330,000 | $305,000 |
| (Source: www.irs.gov) |
Health Savings and Health Flexible Spending Accounts
| 2023 Limits | 2022 Limits | |
| HSA – Annual Contribution Limits | ||
| Self-Only Coverage | $3,850 | $3,650 |
| Family Coverage | $7,750 | $7,300 |
| Catch-up Contributions (age 55 or older) | $1,000 | $1,000 |
| FSA – Annual Contribution Limits | ||
| Self-Only Coverage | $3,850 | $3,650 |
| Family Coverage | $7,750 | $7,300 |
| (Source: www.irs.gov) |
Standard Deductions
| 2023 Limits | 2022 Limits | |
| Single | $13,850 | $12,950 |
| Married Filing Jointly | $27,700 | $25,900 |
| Head of Household | $20,800 | $19,400 |
| (Source: www.irs.gov |
Other Changes for 2023
- In addition the changes mentioned above, 2023 will bring revisions to the tax brackets, exemptions and credits, and limitations. 1
- The Alternative Minimum Tax (AMT) exemption will increase to $81,300. AMT is in place to ensure higher income earners pay at least a minimum amount of tax. 1
- Also in 2023, the Social Security Administration announced an 8.7% cost-of-living adjustment (COLA) Social Security retirement and disability beneficiaries. 2
- The first $17,000 of gifts to any person are excluded from tax, up from $16,000. The exclusion is increased to $175,000 from $164,000 for gifts to spouses who are not citizens of the United States. 1
- The Earned Income Tax Credit (EITC) increased the maximum credit amount to $7,430. This is a refundable tax credit for low and moderate-income workers. 1
If you’re curious how the new changes will affect your bottom line, we are here to talk about your plan. As always, we appreciate the opportunity to be of service.
We wish you a joyful and fulfilling New Year!
1 Source: www.irs.gov
2 Source: https://www.ssa.gov/cola/
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