Retirement Plan Limits & Federal Tax-Bracket Changes for 2023

By Jarrett B. Topel | November 28, 2022

As we wrap up another year, it is time, once again, to turn our thoughts to taxes and tax-planning for the coming year.  While nobody really likes thinking about, or dealing with (and certainly not paying) taxes, there is actually some good news to be had this year.  Due to the unusually high rate of inflation we have been experiencing lately, the IRS retirement plan contribution limits and tax-bracket ranges have increased more than normal for 2023.  So, let’s take the lemon that is tax-planning and turn it into some tasty tax lemonade, by understanding and taking advantage of these new increased limits.

Traditional IRA –

The maximum contribution to a Traditional IRA for 2023 is:

  • $6,500 for anyone under age 50. (Up from $6,000 in 2022.)
  • $7,500 for anyone age 50 or older. (Up from $7,000 in 2022.)

While anyone can contribute to a Traditional IRA, not everyone is eligible to deduct this contribution on their tax return.  If neither you, nor your spouse/partner (if you have one), were eligible for a work-related retirement plan, regardless of whether you actually invested in this plan, there is no income limit to make a deductible Traditional IRA contribution.  All contributions, up to the annual limit, to a Traditional IRA, will be eligible for a tax-deduction.

In order to qualify for a tax-deduction, based on your Traditional IRA contribution in 2023, if you are covered by a workplace retirement plan and you file your taxes as single, or as head of household, your Modified Adjusted Gross Income (MAGI) in 2023 must be:

  • Below $73,000 – you are eligible to make a fully-deductible contribution. 
  • Between $73,000 – $83,000 – you are eligible to make a partially-deductible contribution.
  • Above $83,000 – you are not eligible to make a deductible contribution.

In order to qualify for a tax-deduction, based on your Traditional IRA contribution in 2023, if you and/or your spouse/partner are covered by a workplace retirement plan and you file your taxes as married filing jointly, or as qualifying widow(er), your Modified Adjusted Gross Income (MAGI) in 2023 must be:

  • Below $116,000 – you are eligible to make a fully-deductible contribution. 
  • Between $116,000 – $136,000 – you are eligible to make a partially-deductible contribution.
  • Above $136,000 – you are not eligible to make a deductible contribution.

Roth IRA –

The maximum contribution to a Roth IRA for 2023 is:

  • $6,500 for anyone under age 50. (Up from $6,000 in 2022.)
  • $7,500 for anyone age 50 or older. (Up from $7,000 in 2022.)

In order to qualify to make a Roth IRA contribution in 2023, if you file your taxes as single, or as head of household, your Modified Adjusted Gross Income (MAGI) in 2023 must be:

  • Below $138,000 – you are eligible to make a full contribution. 
  • Between $138,000 – $153,000 – you are eligible to make a partial contribution.
  • Above $153,000 – you are not eligible to contribute.

In order to qualify to make a Roth IRA contribution in 2023, if you file your taxes as married filing jointly or as qualifying widow(er), your Modified Adjusted Gross Income (MAGI) in 2023 must be:

  • Below $218,000 – you are eligible to make a full contribution. 
  • Between $218,000 – $228,000 – you are eligible to make a partial contribution.
  • Above $228,000 – you are not eligible to contribute.

401(k) & 403(b) Plan –

The maximum elective deferral limit for employees into a 401(k) or 403(b) plan for 2023 is:

  • $22,500 for anyone under age 50. (Up from $20,500 in 2022.)
  • $30,000 for anyone age 50 or older. (Up from $27,000 in 2022.)

The maximum total contribution/deferral limit (elective deferrals + employer matching contributions + employer non-elective contributions) into a 401(k) or 403(b) plan for 2023 is:

  • $66,000 for anyone under age 50. (Up from $61,000 in 2022.)
  • $73,500 for anyone age 50 or older. (Up from $67,500 in 2022.)

Simplified Employee Pension (SEP IRA) –

The maximum contribution to a SEP IRA for 2023 is the lesser of:

  • $25% of the employee’s compensation, or
  • $66,000 (Up from $61,000 in 2022.)

Savings Incentive Match Plans for Employees (SIMPLE IRA) –

The maximum elective deferral limit for employees into a SIMPLE IRA plan for 2023 is:

  • $15,500 for anyone under age 50. (Up from $14,000 in 2022.)
  • $19,000 for anyone age 50 or older. (Up from $17,000 in 2022.)

Federal Tax Brackets –

If you file your taxes as single, the tax brackets for 2023 are:

  • 10% on taxable income up to $11,000
  • 12% on taxable income between $11,001 – $44,725
  • 22% on taxable income between $44,726 – $95,375
  • 24% on taxable income between $95,376 – $182,100
  • 32% on taxable income between $182,101 – $231,250
  • 35% on taxable income between $231,251 – $578,125
  • 37% on taxable income over $578,125

If you file your taxes as married filing jointly, the tax brackets for 2023 are:

  • 10% on taxable income up to $22,000
  • 12% on taxable income between $22,001 – $89,450
  • 22% on taxable income between $89,451 – $190,750
  • 24% on taxable income between $190,751 – $364,200
  • 32% on taxable income between $364,201 – $462,500
  • 35% on taxable income between $462,501 – $693,750
  • 37% on taxable income over $693,750

We hope that now that you have the knowledge, all that’s left to do is to use it to your advantage.  One of the best ways to save on your current tax bill, and to prepare for a long, active and fulfilling retirement, is to contribute regularly to retirement plans.  Even if you cannot afford to max-out the plans as described above, every bit counts, so do the best you can and take advantage of the silver lining of increased contribution limits that our current inflationary environment has provided for us.

Disclosures

We are not tax-experts and are not offering tax-advice in this commentary. Please discuss all tax matters with your tax-consultant and/or attorney before making any decisions.

The commentary on this website reflects the personal opinions, viewpoints and analyses of the Topel & DiStasi Wealth Management, LLC employees providing such comments, and should not be regarded as a description of advisory services provided by Topel & DiStasi Wealth Management, LLC or performance returns of any Topel & DiStasi Wealth Management, LLC Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Topel & DiStasi Wealth Management, LLC manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.

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