As we enter the new year, I want to discuss some important updates related to your taxes. The maximum 401k/403b/etc. contribution for 2023 has increased to $22,500. The catch-up contribution for those over 50 has also increased to $7,500. If you contribute to an HSA (Health Saving Account) or FSA (Flexible Spending Account) at work, the limits have increased to $3,850 and $3,050, respectively (for self-only). The family limits have increased to $7,750 for an HSA; and, if you’re over 55, an additional $1,000 can be contributed.
If you qualify to fund an IRA or Roth IRA, the limit is now $6,500, with a $1,000 catch-up contribution for those over 50. Keep in mind that if you fund both an IRA and Roth, the limit applies to the total of both accounts--not each account.
If you use the standard deduction when you file your tax return, it has increased to $27,700 for those married filing jointly and $13,850 for single filers. There is an additional $1,500 added to the deduction for those over 65 or blind for a married filing jointly return. If you are single, and not a surviving spouse, the addition is $1,850.
The annual gift tax exclusion has risen to $17,000 per person, and the lifetime estate tax exclusion has increased by $86,000 to $12.92 million.
The federal tax brackets have also slightly increased, as you can see below.
Source : https://taxfoundation.org/2023-tax-brackets/
As always, please contact us with any questions. Tax planning is unique to each client, and we are happy to go into more detail regarding your specific situation.
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Authors and not necessarily those of Raymond James. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. 401(k) plans are long-term retirement savings vehicles. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty. Contributions to a traditional IRA may be tax-deductible depending on the taxpayer’s income, tax-filing status, and other factors. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty. Like Traditional IRAs, contribution limits apply to Roth IRAs. In addition, with a Roth IRA, your allowable contribution may be reduced or eliminated if your annual income exceeds certain limits. Contributions to a Roth IRA are never tax deductible, but if certain conditions are met, distributions will be completely income tax free. IRA tax deductibility and contribution eligibility may be restricted if your income exceeds certain limits, please consult with a financial professional for more information.