IRS Increases 401(k) Limit to $22,500

The IRS has released (Notice 2022-55) the updated 401(k) contribution limits for 2023. The maximum amount individuals will be able to contribute to their plans is $22,500. The amount was previously $20,500 in 2021 and $19,500 in 2020. The limit applies to those who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan. The catch-up contribution limit remains at $7,500 for individuals over 50 years old. 

For SIMPLE retirement accounts, the maximum amount individuals will be able to contribute is $15,000 (previously $14,000), with the catch-up contribution limit for those 50 and older increasing to $3,500 (previously $3,000). For Solo 401(k)s and SEP plans, the contribution limit will be $66,000 (previously $61,000).

The maximum amount individuals will be able to contribute to their IRAs increased to $6,500 (previously $6,000). The catch up contribution limit remains at $1,000 for individuals over 50 years old. 

The IRS updated the phase out limitations for IRA deductions: 

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or the taxpayer's spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor the spouse is covered by a retirement plan at work, 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 is increased to $73,000 to $83,000, up from $68,000 to $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 is increased to $116,000 to $136,000, up from $109,000 to $129,000.
• 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 is increased to $218,000 to $228,000, up from $204,000 to $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 $0 to $10,000.

The income phase-out range for taxpayers making contributions to a Roth IRA is increased to $138,000 to $153,000 for singles and heads of household, up from $129,000 to $144,000. For married couples filing jointly, the income phase-out range is increased to $218,000 to $228,000, up from $204,000 to $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 $0 to $10,000.