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Federal Tax

2023 Contribution Limits: 401(k) increases to $22,500; IRA to $6,500

Thomson Reuters Tax & Accounting  

Thomson Reuters Tax & Accounting  

The IRS has released 2023 inflation-adjusted contribution limits, phase-out ranges, and income limits for various retirement accounts. (IR 2022-188Notice 2022-55, 2022-45 IRB)

For 2023, the amount an individual can contribute to a 401(k), 403(b), and most 457 plans increases to $22,500, up from $20,500 in 2022. The catch-up contribution amount, for employees 50 and older who participate in these plans, increases to $7,500 from $6,500.

Note. This means participants over 50 can contribute up to $30,000 to one of these plans.

For IRAs, the amount an individual can contribute increases to $6,500 (up from $6,000 in 2022). The catch-up contribution amount remains $1,000.

The amount individuals can contribute to their SIMPLE accounts increases to $15,500 (up from $14,000 in 2022). The catch-up contribution limit for SIMPLE account increases to $3,500 (up from $3,000).

Phase-out ranges and income cap.

In addition, the IRS released new income phase-out ranges for making contributions to a traditional IRA and Roth IRA, as well as the income limit on claiming the Saver’s Credit.

If either the taxpayer or their spouse is covered by a workplace retirement plan during the tax year, the maximum amount they can contribution to a traditional IRA may be reduced (phased out) to zero, depending on the taxpayer’s filing status and income.

Note.  If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-out rule doesn’t apply.

The traditional IRA phase-out ranges for 2023 are:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range begins at $73,000 and ends at $83,000 (up from $68,000 and $78,000 in 2022).
  • For married couples filing jointly, if 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 ($109,000 and $129,000 in 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 increases to between $218,000 and $228,000 ($204,000 and $214,000).
  • 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 phase-out ranges for Roth IRAs are:

  • For singles and heads of household, the phase out begins at $138,000 and ends at $153,000 (up from between $129,000 and $144,000 in 2022)
  • For married couples filing jointly, between $218,000 and $228,000 (up from between $204,000 and $214,000 in 2022)
  • For married couples filing separately between $0 and $10,000.

The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) increases to:

  • $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 couples filing separately, up from $34,000.

For more information on the 401(k) contribution limit, see Checkpoint’s Federal Tax Coordinator ¶ H-9151.

For more information on the amount of traditional IRA contributions that can be deducted, see Checkpoint’s Federal Tax Coordinator ¶ H-12215.

 

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