Interest rates have been rapidly increasing, reaching a four-decade high as of June 2022. To combat inflation, the IRS recently released adjusted contribution limits, standard deductions, and tax brackets for 2023.
Those with Traditional or Roth IRAs will see an increase of $500, making the 2023 contribution limit $6,500. The catch-up contribution limit for IRAs remains at $1,000 for those aged 50 or over.
The income phase-out range for taxpayers making contributions to a Roth IRA has increased between $138,000 and $153,000 for singles and heads of household respectively, compared to the current $129,000 and $144,000 amounts. For married couples filing jointly, the income phase-out range increased between $218,000 and $228,000, compared to the current $204,000 and $214,000.
For individuals with a 401(k) plan the contribution limit is $22,500 for 2023, an increase of $2,000 from this year. 401(k) catch-up contribution limits for individuals 50 and older increased by $1,000 to $7,500 for 2023. This means individuals age 50 or older with a 401(k) can set aside up to $30,000 in the upcoming year.
The SIMPLE retirement account limit for 2023 is $15,500, up from $14,000. The catch-up contribution limit for employees age 50 and over who participate in SIMPLE plans increased by $500 to $3,500.
For 2023 standard deduction rates incrhttps://www.midlandtrust.com/?p=29919&preview=trueeased to the following:
- Single taxpayers $13,850 – Up from $12,950
- Married Couples $27,700 – Up from $25,900
- Head of Households $20,800 – Up from $19,400
All seven federal tax brackets were increased for 2023. This will allow more earnings to be taxed at lower rates generating more take-home pay for each individual.