2023 Contribution Limits + Tax Brackets: What to Expect

Ken Weingarten |
Categories
Tax Planning
Social Security
Medicare
Roth IRAs

With 2023 right around the corner, the IRS recently announced several contribution limits for retirement accounts as well as increased thresholds for income tax brackets. Below are the highlights:

Qualified Retirement Plan Limits (401(k), 403(b), 457, etc.)

Employees who participate in these plans will find that the annual deferral limit has been increased to $22,500 (up from $20,500). Age 50+ catch-up deferrals will also increase to the same $7,500 (up from $6,500).

Roth IRA Contribution Income Limits:

Individuals can make direct & full Roth IRA contributions if Adjusted Gross Income (AGI) is below a certain threshold. Additionally, the amount you can directly contribute is phased out after a certain AGI level. Below are the 2023 income thresholds:

  • $138,000 to $153,000 - Single taxpayers and heads of household
  • $218,000 to $228,000- Married, filing jointly
  • $0 to $10,000 - Married, filing separately

For 2023, the Roth IRA/Traditional IRA contributions limits will increase to $6,500/yr. Age 50+ contributions remain unchanged at $1,000/yr.

Social Security Wage Cap

The Social Security Administration announced that the wage base for calculating the Social Security tax would be increased to $160,200 in 2023 (up from $147,000).

Medicare Premiums

The Centers of Medicare & Medicaid Services (CMS) announced the 2023 premiums for Medicare along with the 2022 Medicare Income-Related Monthly Adjustment Amount (IRMAA) for high-income beneficiaries. Medicare part B enrollees will find that 2023 monthly premiums have decreased to $164.90 (down from $170.10). Below is a helpful chart to understand what additional premiums may be if you have high-income:

More information about IRMAA can be found in our earlier blog here.

 

2023 Tax Brackets

Although federal tax rates are not changing, the IRS announced updates to the income ranges for each tax bracket to account for inflation. Below are helpful infographics demonstrating the changes from 2022 to 2023:

 

The 2023 standard deduction will be increasing as well. Single filers can claim $13,850 (up from $12,950) and Married Filing Jointly can claim $27,700 (up from $25,900).

Conclusion

With many changes along the horizon, it can be daunting to keep up with all this information. Consulting with a fee-only financial advisor can ease the stress of handling all of this yourself.

 

Weingarten Associates is an independent, fee-only Registered Investment Advisor in Lawrenceville, New Jersey serving Princeton, NJ as well as the Greater Mercer County/Bucks County region. We make a difference in the lives of our clients by providing them with exceptional financial planning, investment management, and tax advice.