IRS Increases Retirement Plan Contribution Limits for 2023 by Jack Winter, CPA/PFS, CFP
Posted on December 08, 2022
by
Jack Winter
The IRS recently released its annual cost-of-living adjustments for retirement savers, increasing the annual limits participants can contribute to those plans in 2023.
Employer-Sponsored Retirement Plans
The maximum amount you may contribute via salary deferral to an employer-sponsored 401(k) or 403(b) retirement savings plan in 2023 is $22,500, up from $20,500 last year. If you are age 50 or older, you may make an additional $7,500 in catch-up contributions, allowing you to put aside as much as $30,000 for your eventual retirement.
Employer-sponsored retirement savings plan participants have until the last day of the tax year to max out their annual 401(k) contributions. For self-employed business owners with Schedule C income, the deadline for making a 2023 401(k) contribution via salary deferral and a profit-sharing employer match is April 15, 2024.
Individual Retirement Accounts (IRAs)
For 2023, the limit on traditional IRA and Roth IRA contributions increases to $6,500 plus an additional $1,000 if you are age 50 or older. Contributions to traditional IRAs may be deductible when you or your spouse is covered by a workplace retirement savings plan, such as a 401(k). However, depending on your filing status and gross income, the amount of the deduction may be reduced or phased out completely based on the following schedule:
- For a single taxpayer covered by a workplace retirement plan, the phase-out range increases to between $73,000 and $83,000, up from between $68,000 and $78,000.
- For married couples filing jointly in which the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range increases to between $116,000 and $136,000.
- 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 increases to between $218,000 and $228,000.
- 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.
The income phase-out range for taxpayers making contributions to Roth IRAs also increases in 2023 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 increases to between $218,000 and $228,000, up from between $204,000 and $214,000. 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. If a taxpayer earns too much income to contribute to a Roth IRA in 2023, they may instead contribute to a traditional IRA and later convert that account to a Roth for the benefit of tax-free distributions after reaching age 59½, provided they own the Roth IRA for a minimum of five years.
The deadline for making an annual contribution to a traditional IRA or a Roth IRA is the federal tax-filing deadline. Therefore, barring any postponements to the filing deadline, you have until April 15, 2024, to make your 2023 IRA contribution.
About the Author: Jack Winter, CPA/PFS, CFP, is an associate director of Tax Services with Berkowitz Pollack Brant Advisors + CPAs, where he provides estate planning, tax structuring and business advisory services to individuals, families and business owners. He can be reached at the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or via email at info@bpbcpa.com.
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