It’s the super bowl for Financial Planners and Tax Planners! Ok, maybe that is a little extreme but every year the IRS announces changes to tax brackets, standard deductions, Roth IRA, 401(k), and other retirement plan limits. We received those this week and are very excited to share them with you so you can start making plans around your budget in 2023. With record employee raises coming to folks in 2022, we highly recommend that you recalibrate your Baby Step 4 goals to match your current income and current limits to retirement accounts. Ok, let’s dig in……
2023 Tax Brackets & Standard Deduction
I want to first start with the standard deduction. The standard deduction is the amount of money you don’t pay tax on as long as you don’t itemize certain expenses such as the giving, state and local taxes, and mortgage interest. Since the Jobs and Tax Act of 2017, most individuals and families now take the standard deduction, making their tax situation somewhat easier to understand. That jumps 7% in 2023 to $27,700 for a married couple filing jointly, and it will increase to $13,850 for individuals and married couples filing separately. This is an excellent jump because it will provide families with additional tax savings in that more income comes to you tax-free! Likewise, the pay ranges on the tax code seven marginal rates will almost jump 7% for the tax year 2023. You can click here to see the updated brackets for both single and married filers.
2023 Retirement Plan Limits
The Roth IRA and Traditional IRA limits for 2023 have been increased to $6,500 per year for those under 50 and $7,500 for those over the age of 50. Your 401(k), 403(b), or 457 plan will now allow you to contribute $22,500 each year if under 50, and if over 50, that limit will increase to $30,000 with the $7,500 catch-up contribution. Those with a SIMPLE IRA with our firm will now be able to contribute $15,500, up from $14,000. The SEP-IRA will increase to $66,000; your HSA contribution has been increased by $200 for an individual to $3,850 and $450 to $7,750 for a family HSA plan.
The income limits for becoming ineligible for a Roth IRA will increase by $9,000 for a single filer to $138,000 in 2023 and go up by $14,000 for married filing jointly to $218,000 in 2023.
Finally, a lesser-known benefit is the Savers Tax Credit. If you are filing jointly, contributing to a retirement plan or IRA / Roth, and making less than $72,500 in 2023, you’ll qualify for a 10% tax credit! WOW. If your income is less than that, it gets even better.
You will qualify for this special tax credit if you make $36,250 or less as a single filer. Please put your Roth or IRA contributions on your tax return if you're under these limits. Otherwise, the IRS will not know to give you those benefits.
Here is a summary of all the changes
401(k), 403(b), 457 and TSP Contribution Limit: $22,500 (Increase of $2,000)
Annual Catch-Up Contribution for Employees over 50: $7,500 (Increase of $1,000)
Overall Contribution Limit (Employer + Employee): $66,000 (Increase of $5,000)
SEP IRA and Solo 401(k) Limits: $66,000 (Increase of $5,000)
SIMPLE IRA Contribution Limits: $15,500 (Increase of $1,500)
SIMPLE IRA Catch-Up Contributions For Emp. over 50: $3,500 (Increase of $500)
Traditional IRA and Roth IRA Contribution Limits: $6,500 (Increase of $500)
Traditional IRA and Roth IRA Catch-Up Contribution $1,000 (No Increase)
Health Savings Account Contribution (Single) $3,850 (Increase of $200)
Health Savings Account Contribution (Family) $7,750 (Increase of $450)
2023 RETIREMENT PLAN CONTRIBUTION LIMITS & TAX BRACKETS ANNOUNCED
October 23, 2022
John-Mark Young
Whitaker-Myers Wealth Managers is an SEC-registered investment adviser firm. The information presented is for educational purposes only and intended for a broad audience. The information does not intend to make an offer or solicitation to sell or purchase any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed. Whitaker-Myers Wealth Managers reasonably believes that this marketing does not include any false or misleading statements or omissions of facts regarding services, investment, or client experience. Whitaker-Myers Wealth Managers has a reasonable belief that the content will not cause an untrue or misleading implication regarding the adviser’s services, investments, or client experiences. Please refer to the firm’s ADV Part 2A for material risks disclosures.
Past performance of specific investment advice should not be relied upon without knowledge of certain circumstances of market events, the nature and timing of the investments, and relevant constraints of the investment. Whitaker-Myers Wealth Managers has presented information in a fair and balanced manner.
Whitaker-Myers Wealth Managers is not giving tax, legal or accounting advice, consult a professional tax or legal representative if needed.
Copyright (c) 2023 Clearnomics, Inc. and Whitaker-Myers Wealth Managers, LTD. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company's stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.
