Last year's rapid rise in inflation prompted the IRS to implement sizable adjustments to contribution limits and tax brackets. "As a result, many taxpayers could see substantial savings on their 2023 taxes," says Hayden Adams, CPA, CFP®, director of tax and wealth management at the Schwab Center for Financial Research. Here's a look at the changes that may affect you most.
This year's 9.8% increase to the standard contribution limit is the largest in the 45-year history of 401(k)s.
|Account type||Contribution type||2022||2023||Change|
|401(k), 403(b), most 457 plans||Standard contribution||$20,500||$22,500||+$2,000|
|Catch-up contribution (age 50+)||$6,500||$7,500||+$1,000|
|Traditional and Roth IRAs||Standard contribution||$6,000||$6,500||+$500|
|Health savings accounts (HSAs)||Individual||$3,650||$3,850||+$200|
Roth IRA income limits
*Contribution limits for married filing jointly are per person.
†Reduced contributions presented here are for illustrative purposes. See IRS Publication 590-A to calculate your reduced contribution based on your MAGI.
This year's 6.9% increase is the largest since the standard deduction was nearly doubled in 2018 as part of the Tax Cuts and Jobs Act (TCJA).
|Married filing jointly||$25,900||$27,700||+$1,800|
Income tax brackets
Long-term capital gains rates
Gift and estate tax exclusion
The TCJA also doubled the lifetime gift and estate tax exclusion. As a result, just 0.1% of estates that filed returns in 2020 were expected to be taxed.2 This year's increase to the exclusion amounts may mean even fewer estates will face taxes in 2023.
Annual gift tax exclusion>Single>2022$16,000 per recipient>2023$17,000 per recipient>Change+$1,000>
Married filing jointly>2022$32,000 per recipient>2023$34,000 per recipient>Change+$2,000>
Lifetime gift and estate tax exclusion>Single>2022$12.06 million>2023$12.92 million>Change+$860,000>
Married filing jointly>2022$24.12 million>2023$25.84 million>Change+$1.72 million>
1Roth IRA income limits are based on modified adjusted gross income, which is a taxpayer's adjusted gross income with certain deductions and income added back in.
2Tax Policy Center, Briefing Book, 2020
This information does not constitute and is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner, or investment manager.
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.
All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed. Supporting documentation for any claims or statistical information is available upon request.
Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.
The policy analysis provided by Charles Schwab & Co., Inc., does not constitute and should not be interpreted as an endorsement of any political party.
The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.0323-2ATE