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Individual contribution limits for 401(k) plans recently increased to $22,500 in 2023, up from $20,500 in 2022, according to a recent announcement from the IRS. This is one of the cost-of-living increases that taxpayers should consider while planning for 2023. Income ranges to determine eligibility for deductible contributions to IRAs and the Saver’s Credit also increased.

Here are some of the changes to contribution limits:

• The limit on employee contributions to 401(k), 403(b), most 457 plans and the Thrift Savings Plan increased to $22,500.
• The catch-up contribution limit for employees age 50 and over who participate in 401(k), 403(b), most 457 plans and the Thrift Savings Plan increased to $7,500.
• The annual IRA contribution limit increased to $6,500. For employees age 50 and over, the IRA catch-up contribution limit remained at $1,000.
• The catch-up contribution limit for employees age 50 and over who participate in SIMPLE plans increased to $3,500.
• The amount individuals can contribute to SIMPLE retirement accounts increased to $15,500.

Here are some of the changes to phase-out income ranges:

• The phase-out range for traditional IRA contribution deductions increased.
  • The new range for single taxpayers covered by a workplace retirement plan is between $73,000 to $83,000.
  • The range for married couples filing jointly where the spouse making contributions is covered by a workplace retirement plan is between $116,000 to $136,000.
  • The range for married couples where the contributor is not covered by a workplace retirement plan and the spouse is covered is between $218,000 to $228,000.
• The income phase-out range for Roth IRA contributions increased to between $138,000 to $153,000 for single taxpayers and heads of household, and between $218,000 to $228,000 for married taxpayers filing jointly.
• The income limit for the Saver’s Credit increased to $36,500 for single taxpayers, $54,750 for heads of household, and $73,000 for married taxpayers filing jointly.

More information about 2023 cost-of-living adjustments is available in Notice 2022-55 on IRS.gov.

Now is the time to reach out to your tax professional to prepare for 2023 and the professionals at Cavanaugh & Co are here to assist. Contact us today to schedule an appointment.