A note before you read: This page was posted in early January. Note that as time passes the IRS and congress may make changes to rules, which could positively, or negatively, affect financial plans. As a service-first firm, we work hard work with our clients to manage tax rule changes, and be proactive in planning ahead. It takes a lot of work, but being intentional with wealth management can bring clarity and confidence. We encourage you to reach out and schedule a time to discuss how to manage income, investment risk, and taxes.
With the new year comes new important numbers to keep track of. Some numbers like 401k contributions, IRA contributions, and income brackets, change every year, hopefully for the better.
Other numbers, like income thresholds for Social Security taxes, are not adjusted (which doesn't help the tax situation).
Given the variety of sources that report relevant numbers, it can be difficult to quickly find the right reference to put it all in one place.
I'm going to try and make it easy for you.
Download my 2023 Tax Cheatsheet [downloadable PDF].
It covers the most important annual limits + figures that are commonly referred to during the year.
There are a couple of key changes this year. As I recently pointed out, the passing of Secure Act 2.0 has changed retirement rules for some folks.
Here are five updates that I wanted to highlight for 2023:
- 401k, IRA & Roth contribution increases: 1
2022 IRA and Roth contribution limits are $6,000, or $7,000 for ages 50 and older.
2023 IRA and Roth contribution limits have increased to $6,500, or $7,500 age 50 and older.
401k contributions have increased from $20,500, or $27,000 ages 50 and over to new 2023 amounts of:
401k contributions of $22,500 or $30,000 for ages 50 and over.
- More options for Roth savings:2
Thanks to the Secure Act 2.0, there are now Simple Roth IRAs and SEP Roth IRAs.
In addition, employer 401k contributions can now be put into a Roth option.
This is all going to need IRS rules and custodian coding changes, which might take some time.
- RMD start date changes2
If you turn 72 in 2023, there is no RMD this year. If you are ages 64-71, born between 1951-1958, RMDs now start at age 73.
Eventually, RMD’s start age will be age 75.
- The penalty for missing all or part of your RMD decreased to 25% in 2023.2
There is also a route to go ahead and pay taxes on past-due RMDs, if corrected within 2 years, to have the penalty drop to 10%.
- Social Security benefit checks see a Cost of Living Adjustment: 3
Announced last October, the Social Security Administration is applying a COLA bump of 8.7% if you have not seen it already.
HOWEVER, the amount of income you can receive, calculated by your Provisional Income, did not change. Those rates remained flat, and are a tax cliff! Meaning, if you're married and your Provisional Income was below $32,000 but is now over that by even one dollar, the amount of your Social Security subject to taxes goes from 0% to 50%. If you're married and your Provisional Income was between $32,000-$44,000 and is now over that by even one dollar, the amount of your Social Security subject to taxes goes from 50% to 85%.
Hopefully, this cheatsheet is helpful.