On October 21st, the IRS announced updated 401(k) and IRA contribution limits for 2023.
Qualified Retirement Plan Contribution Limits:
The maximum amount someone can contribute from their own compensation to a qualified retirement plan during the year, through 401(k) or 403(b) pre-tax and/or Roth after-tax contributions combined, has increased from $20,500 in 2022 to $22,500 in 2023.
In 2022, participants age 50 and over could contribute an additional $6,500 in catch-up. This has increased to $7,500 in 2023.
The total combined contribution limit (including employer contributions, employee contributions, and forfeitures) has increased from $61,000 in 2022 to $66,000 in 2023.
The maximum amount of compensation that can be taken into account for purposes of allocating contributions or forfeitures or for nondiscrimination testing has increased from $305,000 in 2022 to $330,000 in 2023.
Additionally, the maximum amount someone can contribute to a qualified 457(b) retirement plan through pre-tax and Roth after-tax contributions, plus any employer contributions has increased from $20,500 to $22,500 in 2023.
Finally, the maximum amount of an annual retirement benefit payable as a life annuity to someone through a defined benefit pension plan has increased from $245,000 in 2022 to $265,000 in 2023.
IRA Limits:
The maximum annual contribution amount an individual can make to their Individual Retirement Account (IRA) has increased from $6,000 in 2022 to $6,500 in 2023.
The IRA catch-up contribution limit for individuals aged 50 and above remains the same at $1,000.
Taxpayers can deduct contributions to a traditional IRA if they fall within the following limits for Adjusted Gross Income (AGI):
- For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to between $73,000 and $83,000 for 2023, up from between $68,000 and $78,000 for 2022.
- For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to between $116,000 and $136,000 for 2023, up from between $109,000 and $129,000 for 2022.
- For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to between $218,000 and $228,000 for 2023, up from between $204,000 and $214,000 for 2022.
- For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.
Roth IRA income phase-outs are as follows (based on Adjusted Gross Income):
- The income phase-out range for taxpayers making contributions to a Roth IRA is increased to between $138,000 and $153,000 for singles and heads of household, up from between $129,000 and $144,000.
- For married couples filing jointly, the income phase-out range is increased to between $218,000 and $228,000 for 2023, up from between $204,000 and $214,000 for 2022.
- The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.
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