It’s the beginning of another year and changes come that all investors should be aware of. Consider these your 2023 important dates and numbers. Many of these are adjustments or changes to thresholds or deadlines. Let’s take a look at some new 2023 information.
Let’s begin with retirement plans. Think 401(k), 457, or 403(b). These are often referred to as qualified plans. In general, the overall total per participant limit increases to $66,000 for 2023. That means a participant (employee) contribution limit of $22,500 and an extra $7,500 catch up contribution for those age 50 and over. For the 403(b) specifically, there is another 15+ years of service catch up of $3,000.
Do you have a SIMPLE IRA? Your new contribution limit for 2023 is $15,500. If you are age 50 or over, you have another $3,500 available as a catch up contribution.
For SEP IRA account holders, you need to have at least $750 in income for 2023 to participate. The maximum percentage of compensation contributable is the lesser of 25% (this is adjusted by net earnings if self-employed using a special formula) of compensation or $66,000. Your overall maximum contribution for 2023 is $66,000 although likely much lower due to the “lesser of” language and percentage of compensation.
Both traditional and Roth IRAs have an increased contribution limit of $6,500 for 2023. The catch up contribution for those age 50 and over remains $1,000. The Roth IRA eligibility phaseout starts at $138,000 (MAGI ) for singles, and $218,000 (MAGI) for married couples. For the traditional IRA, the deductibility if covered by a workplace plan starts at $73,000 (MAGI) for singles, $116,000 (MAGI) for married filing joint, and $218,000 (MAGI) if only your spouse is covered by a qualified workplace plan.
What about HSAs? Health Savings Accounts also received a contribution increase. For an individual, the maximum contribution is $3,850. The family maximum contribution is $7,750. The catch up contribution for those age 50 and over is $1,000.
New 2023 tax updates are here as well. The basic standard deduction has increased again. For those in the married filing jointly, the standard deduction is $27,700, for singles it’s $13,850. You get an additional deduction for those 65 or older, or blind of $1,500 per each eligible spouse for the MFJ status, or $1,850 for singles.
Further, the IRS will begin accepting and processing tax returns on Monday, January 23, 2023. Given how the calendar falls, most taxpayers need to submit their returns by the Tuesday, April 18, 2023 deadline (unless a valid extension until Monday, October 16, 2023 is filed). For California taxpayers, due to the recent severe weather leading to a federally declared disaster area, you have until May 15, 2023 to file. For this specific group of taxpayers, the following counties are currently covered: Alameda, Colusa, Contra Costa, El Dorado, Fresno, Glenn, Humboldt, Kings, Lake, Los Angeles, Madera, Marin, Mariposa, Mendocino, Merced, Mono, Monterey, Napa, Orange, Placer, Riverside, Sacramento, San Benito, San Bernardino, San Diego, San Francisco, San Joaquin, San Luis Obispo, San Mateo, Santa Barbara, Santa Clara, Santa Cruz, Solano, Sonoma, Stanislaus, Sutter, Tehama, Tulare, Ventura, Yolo and Yuba counties. The current list of eligible localities is always available on the Tax Relief in Disaster Situations page on IRS.gov.
Some updates to Social Security as well. The wage base on which Social Security is calculated is now $160,200. There is no wage limit for Medicare calculation. With regard to those who are earning Social Security, you have new earnings test exemptions. If you are below your full retirement age (FRA) in 2023, you can earn $21,240 before the earnings test kicks in. If you reach FRA in 2023, you can earn up to $56,250. It’s important to note that the earnings test exemption amount only applies to the months prior to reaching your FRA. If you are subject to earnings test amounts and Social Security payment is withheld, it’s important to know that it is not permanently lost. Once you reach FRA, your monthly benefit amount is increased permanently to account for months it was withheld.
While we are on Social Security, it’s a good time to recognize when exactly FRA is for each age group. It’s no longer 65. Early retirement is still age 62 (and up until your FRA). Please see this graphic for more information about your FRA.
Full Retirement Age depends on your birth year.
Social Security provisional income limits remain the same for 2023. This year, a married couple filing jointly who receive Social Security, will see 50% of their Social Security benefit taxed if they earn between $32,000 and $44,000, and 85% of their Social Security becomes taxable if they earn in excess of $44,000. For singles, 50% is taxable if they earn between $25,000 and $34,000, and 85% is taxable if earning in excess of $34,000.
There will likely be additional changes and revisions around these items. As always, if you are not sure, check with your financial planner to confirm the latest information. As an independent Certified Financial Planner™, I can help you with these and other updates. Contact me and let’s get started! #talktometuesday #education #Hireaplanner #stressfree #IRS #401k #403b #Roth #IRA #RothIRA #SocialSecurity #Tax #TaxFiling