Retirement account inflation adjustments issued for 2023

By Martha Waggoner

The IRS on Friday announced the 2023 inflation-adjusted dollar-amount ceilings and thresholds for a wide range of qualified retirement plans and accounts, including traditional individual retirement arrangements (IRAs) and Roth IRAs (Notice 2022-55). The notice also provides the 2023 limits on elective deferrals for plans under Sec. 401(k) and Sec. 403(b) and most plans under Sec. 457.

The Service set $22,500 as the amount that individuals can contribute to Sec. 401(k) plans in 2023, up from $20,500 for 2022. The increase also applies to Sec. 403(b) plans, most Sec. 457 plans, and the federal government's Thrift Savings Plan.

The limit on annual contributions to an IRA increased to $6,500, up from $6,000. The IRA catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living (COLA) adjustment and remains $1,000.

The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is increased to $7,500, up from $6,500. This means that, starting in 2023, these same participants can contribute up to $30,000.

The amount individuals can contribute to their SIMPLE retirement accounts is increased to $15,500, up from $14,000. The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE plans is increased to $3,500, up from $3,000.

The income ranges for determining eligibility to make deductible contributions to traditional IRAs, to contribute to Roth IRAs, and to claim the saver's credit all increased for 2023.

For traditional IRAs, the phaseout ranges for 2023 are:

  • For single taxpayers covered by a workplace retirement plan, the phaseout range increases to between $73,000 and $83,000, up from between $68,000 and $78,000.
  • For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phaseout range increases to between $116,000 and $136,000, up from between $109,000 and $129,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phaseout range increases to between $218,000 and $228,000, up from between $204,000 and $214,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phaseout range is not subject to an annual COLA and remains between $0 and $10,000.

The income phaseout range for taxpayers making contributions to a Roth IRA increases 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 phaseout range increases to between $218,000 and $228,000, up from between $204,000 and $214,000. The phaseout range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual COLA and remains between $0 and $10,000.

The income limit for the saver's credit (also known as the retirement savings contributions credit) for low- and moderate-income workers is $73,000 for married couples filing jointly, up from $68,000; $54,750 for heads of household, up from $51,000; and $36,500 for singles and married individuals filing separately, up from $34,000.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.

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