The IRS has issued a few notices to adjust for inflation for 2023 in Notice 2022-38.

  • The 2023 Standard Deduction is increased to
    • $27,700 for MFJ (up from $25,900)
    • $20,800 for HOH (up from $19,400)
    • $13,850 for Single filiers and MFS (up from $12,950)
  • The refundable portion of the Child Tax Credit is $1,600 (up from $1,500 in 2022)
  • The annual gift exclusion is $17,000 (up from $16,000)
  • The Unified Credit Against Estate Tax for a decedent passing away in 2023 is $12,920,000 (up from $12,060,000, an increase of $860,000)

Also adjusted are the tax brackets for 2023, with the highest marginal rate at 37%, outlined below:


2023 Inflation adjustments for retirement accounts

IRS Notice 2022-55 included the following notable cost of living adjustments for the 2023 tax year:

  • 401(k) employee contribution for 2023 is $22,500 (up from $20,500 for 2022)
    • $7,500 catch-up contribution for taxpayers aged 50 and over (up from $6,500)
  • IRA contribution limit is $6,500 (increased from $6,000 in 2022)
    • $1,000 catch-up contribution is unchanged
  • SEP contribution limit is increased to $66,000 (up from $61,000)
  • SIMPLE contribution limit is $15,500 (up from $14,000)
  • ROTH IRA phase out limits for taxpayer MAGI of:
    • Single/HOH: $138,000 to $153,000 (up from $129,000 and $144,000 for 2022)
    • MFJ: $218,000 to $228,000 (up from $204,000 and $214,000)
    • MFS: Remains at $0 to $10,000 (not subject to cost-of-living adjustments)

 

2023 Cost-of-Living Adjustments (COLA) for Social Security

  • 8.7% increase to Social Security and SSI benefits for 2023
  • The maximum amount of earnings/wages subject to the Social Security tax (taxable maximum) will increase to $160,200
  • More of these benefits may be subject to tax because the taxable thresholds are not adjusted for inflation

 

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