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The Numbers You Need: The 2023 IRS Limits



Here they are, the numbers you need from the IRS to plan ahead for next year. Inflation has been taking a bite, but a somewhat silvery lining is that it will at least bring a little tax relief as brackets expand by 7%, and opportunities to save will also increase. Remember that the below applies to money you earn starting January 1, 2023, so don’t make any changes just yet. See this post for the numbers affecting 2022. Some important highlights:

Standard deduction

  • increases to $13,850 if your filing status is single or married-filing-separately

  • increases to $20,800 if your filing status is head of household

  • increases to $27,700 if your filing status is married-filing-jointly

Review this post for an explainer on the filing statuses and which to use.

Tax brackets

  • the number of brackets remains the same at 7

  • the limits of each bracket increases by about 7%: see here for specifics on the brackets

401k/403b/457/Thrift Savings Plan contribution limits

  • the employee contribution limit increases to $22,500

  • the catchup contribution limit (which is available to you beginning the year you turn 50) increases to $7,500

  • the overall plan limit (employee + employer + catchup) increases to $66,000. This is the number for those contributing to SEP or Solo 401k plans to keep in mind as well

IRA contribution limits

  • the IRA and Roth contribution limit increases to $6,500, and the catchup contribution remains $1,000.

  • the income limits that relate to making or deducting these contributions will change (see here for details), so familiarize yourself with those limits, or ask your advisor, before making a contribution in 2023

Estate and gift tax exemption

  • the estate tax exemption increases to $12.92 million per individual - so a married couple can leave an estate of $25.84 million free of federal estate taxes. States might have a different idea, of course.

  • the annual gift tax exclusion will increase to $17,000. This means you can give $17,000 to as many people each year as you like without it having an impact on your eventual estate tax. If you are married, you and your spouse can each give $17,000. And remember, a gift is never taxable to the recipient.

Social Security

  • cost-of-living adjustment (COLA): 8.7%

  • the earnings limit increases to $160,200. This is the maximum amount of annual income that is subject to the Social Security tax. If you expect your gross income to be at least that much next year, remember to factor in the increased take-home once you reach that limit, and be proactive about giving those dollars a job. Also keep in mind that the limit is applied to each person individually: marital status, deductions, and/or your spouse’s income don’t matter.

You can use the above information, as well as any expected changes to your situation (expected job change? change in marital status?) to consider any moves you might want to make in January for the rest of the year.

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