The IRS has recently released the inflation-adjusted contribution limits, phase-out ranges, and income limits for various retirement-related items for the 2023 tax year as follows.
401(k), 403(b), most 457 plans, and the Thrift Savings Plan
The annual limitation on elective deferrals (contributions) for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan, as well as the catch-up contributions available to taxpayers aged 50 and over has been indexed for inflation to the following amounts:
- Elective deferral limit has increased by $2,000 to $22,500, up from $20,500.
- Catch-up contributions for taxpayers aged 50 and over increased by $1,000 to $7,500.
As a result of these changes, taxpayers aged 50 and over participating in these plans may contribute up to $30,000 in 2023.
SIMPLE Plans
The amount taxpayers can contribute to SIMPLE retirement accounts has increased by $1,500 to $15,500. The catch-up contribution limit for SIMPLE retirement accounts has increased from $3,000 to $3,500.
IRA’s
The maximum IRA contribution has increased from $6,000 to $6,500, with the catch-up contribution amount remaining at $1,000.
Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If either the taxpayer or the taxpayer’s spouse were covered by a retirement plan at work during the year, the deduction may be reduced, or phased out depending on the taxpayer’s filing status and income. If neither the taxpayer nor their spouse is covered by a retirement plan at work, then the phase-out rules do not apply. The income limitations for deductible contributions to a traditional IRAs have been increased to the following amounts:
- For single taxpayers who are covered by a workplace retirement plan, the income phase-out range is now $73,000 to $83,000, an increase of $5,000.
- For married couples filing jointly, where the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is now $116,000 to $136,000, an increase of $7,000.
- For married couples filing jointly, where the spouse who makes the IRA contribution is not covered by a workplace retirement plan, the income phase-out range is now $218,000 to $228,000, an increase of $14,000.
- For a married individual filing a separate return, the income phase-out range is not indexed for inflation and remains at $0 to $10,000.
The income phase-out range for taxpayers making contributions to a Roth IRA has also increased as a result of the annual cost-of-living adjustment:
- For single and heads of household filers, the income phase-out range is now $138,000 to $153,000, an increase of $9,000.
- For married couples filing jointly, the income phase-out range is $218,000 to $228,000, an increase of $14,000.
- For married couples filing separately, the income phase-out range is not subject to the annual cost-of living adjustment and remains at $0 to $10,000.
Saver’s Credit (Retirement Savings Contribution Credit)
The 2023 income limit for the Saver’s Credit increased as follows:
- For singles and married couples filing separately, the limitation has increased to $36,500.
- For heads of household, the limitation has increase to $54,750.
- For married taxpayers filing jointly, it has increased to $73,000.
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