2023 Key Financial Numbers
2023 Key Financial Numbers
It is that time of year folks! The time when I get to run through key financial numbers and changes for the 2023 calendar year. We always find it helpful to get this out with plenty of time to make appropriate adjustments for the New Year. Without further ado, I present to you the 2023 key figures.
Retirement Plans
Retirement plans are the first place I always look when seeing what changes the government made so I can adjust accordingly. In 2023, the new 401(k) max will be $22,500 with a $7,500 catch-up if you are 50 or over next year. This is a sizeable increase from 2022 figures of $20,500 and $6,500 catch-up. Make sure you adjust those percentages at work! The aggregate amount that can be put into a defined contribution retirement plan (including employer match) is $66,000 (up from $61,000 last year). In addition, the annual compensation amount that most plans will match is income up to $330,000.
IRAs
Let’s talk IRAs or Roth IRAs. The amount you can put away this year is $6,500 with a $1,000 catch-up for 50 or older, increasing from $6,000 in 2022. The Roth IRA phase-out for earnings for 2023 is $138,000-$153,000 if single and $218,000-$228,000 if married filing jointly. As for Traditional IRA, if covered by a plan, your deductible contributions phase-out if you make $116,000-$136,000 if filing jointly or $73,000-$83,000 if single. If one spouse is covered by a plan the Traditional IRA phase-out is at $218,000-$228,000 filing joint.
Health Savings Account
My favorite little vehicle is the Health Savings Account. The amount you can contribute in 2023 is $7,750 for a family with a $1,000 age 55 and older catch-up, or $3,850 if single. Again, this is an increase from last year so adjust those payrolls accordingly.
Tax Deductions
Let’s turn our attention to taxes and talk about some taxes, yay. The standard deduction next year is $27,700 for married filing jointly or half that if single. As for tax brackets, the highest tax bracket goes into effect on a married filing jointly couple at $693,750 and $578,100 if single. As a reminder, the top tax rate is 37%, and do not forget these rates are only on the dollars above that income, not on the entire income.
Gift Tax
From a gift tax perspective, you can now give $17,000/yr to as many individuals as you would like without having to file a gift tax return. Additionally, if married remember you and your spouse can double that amount regardless of whose account money is gifted from. This is often done with parents giving to children.
If a parent is married and so is the child you can essentially give $68,000/yr without triggering any tax reporting, which reminds me I am officially offering myself up for adoption if anyone is inclined. From an estate perspective, the total amount one can gift during or after their lifetime without triggering a Federal Estate tax is $12,920,000. Most of us will not have to worry about it, although the winner of that massive Powerball the other week will (you can hear my jealousy can’t you).
Social Security and Medicare Tax
For 2023, you will be required to pay Social Security tax on earnings up to $160,200. Once you hit that earning amount, no further Social Security tax withholding should you be expected to pay. As for Medicare tax, you will pay 1.45% on all income and an additional .9% on income over $200,000 if single or $250,000 if married and filing jointly.
The Theme
As you can see there is a real theme going on here. We are in a hyperinflationary period as we all know. Thus, the government has adjusted these limits upwards on basically everything to help accommodate. Certainly, take advantage of these additional savings capabilities when able. If any questions don’t hesitate to reach out and as always stay wealthy, healthy, and happy.
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