The limit for both 401k and IRA plans has increased in 2023. The increase in the contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan raises it to $22,500 from $20,500.
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 adjustment. Thus, it 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 increases to $7,500, up from $6,500. Therefore, participants in these programs 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 participating in SIMPLE plans increases to $3,500, up from $3,000.
The income ranges for determining eligibility for different retirement saving options increased for 2023. This includes making deductible contributions to traditional IRAs, contributing to Roth IRAs, and claiming the Saver’s Credit.
401k and IRA Deductions
Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. Suppose a retirement plan covered the taxpayer or the taxpayer’s spouse at work during the year. Depending on filing status and income, the deduction may be reduced or phased out until it is eliminated. (If a retirement plan at work covers neither the taxpayer nor the spouse, the phase-outs of the deduction do not apply.) Here are the phase‑out ranges for 2023:
- For single taxpayers covered by a workplace retirement plan, the phase-out range increases to between $73,000 and $83,000. This is 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 phase-out range increases to between $116,000 and $136,000. This is 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 covered, the phase-out range increases to between $218,000 and $228,000. This is up from between $204,000 and $214,000.
- The phase-out range is not subject to an annual cost-of-living adjustment for a married individual filing a separate return covered by a workplace retirement plan. It remains between $0 and $10,000.
The income phase-out range for taxpayers making contributions to a Roth IRA increases to between $138,000 and $153,000 for singles. For heads of household, it is up between $129,000 and $144,000. The income phase-out range for married couples filing jointly 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.
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.
The amount individuals can contribute to their SIMPLE retirement accounts increases to $15,500, up from $14,000.