IRS releases inflation adjustments for next year including increases to retirement contributions

High inflation will raise more than 50 tax provisions for 2023 including tax rates and standard deductions.  See below for a select summary of Revenue Procedure 2022-38 and Notice 2022-55 which detail those adjustments.

• The Standard Deduction. For married couples filing jointly — $27,700, up $1,800 from the prior year; for single and married filing single — $13,850, up $900; for head of household — $20,800, up $1,400

• Marginal Tax Rates. The rates remain the same for 2023, but the amount of income in each bracket has increased.

• Estates of decedents who die during 2023 have a basic exclusion of $12.92 million, up from a total of $12.06 million for estates of decedents who died in 2022. The annual exclusion for gifts increases to $17,000 for calendar 2023, up from $16,000 for calendar year 2021,

• The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is increased to $22,500, up from $20,500.

• 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. Therefore, participants in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan who are 50 and older can contribute up to $30,000, starting in 2023. 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 Alternative Minimum Tax exemption amount rises to $81,300 and begins to phase out at $578,150 ($126,500 for MFJ, with phaseout beginning at $1,156,300).

• For tax year 2023, the foreign earned income exclusion is $120,000, up from $112,000 for tax year 2022.

A lot more than just these items changed.  Happy to discuss as it pertains to your individual situation.