It may be time to up your 401(k) contributions. The IRS is increasing the limit by $2,000 for 2023, the agency announced Friday.
Cost of living adjustments will bring the 2023 limit to $22,500 (up from $20,500) for individual contributions to retirement accounts including 401(k)s, 403(b)s, most 457 plans and Thrift Savings Plans.
Individuals 50 and older can contribute an additional $7,500, increasing for the first time since 2020. That brings the total contribution limit for those 50 and older to $30,000.
Taxpayers who contribute to individual retirement accounts (IRAs) can put away an extra $500 starting in 2023. The limit increased to $6,500, up from $6,000, plus $1,000 in catch-up contributions for those 50 and older. The catch-up contribution limit is the same as last year.
Income limits for Roth IRA contributions will increase in 2023 as well. The income phase-out range for Roth IRAs will be between $138,000 and $153,000 for single filers and heads of household (up from between $129,000 and $144,000).
The range for married couples filing jointly goes up to $218,000 to $228,000 (from between $204,000 and $214,000). The phase-out range for married individuals filing separately remains at $0 to $10,000.
Individuals can contribute up to $15,500 to SIMPLE accounts (savings incentive match plan for employees), up from $14,000 in 2022.
With the cost-of-living adjustments, Americans will be able to save more money for retirement, which in many cases will lower their income tax.
Need more information on cost-of-living adjustments? Check out the IRS’ notice.
Or contact us directly at: US Tax Consultants – Phone: +34 915 194 392