Everything is rising due to the inflation rate. Some of them are helpful, while others will be costly.
Social Security Administration announces the increases for 2023
- The maximum earnings subject to the FICA tax will increase from $147,000 to $160,200 which means for 2023, the maximum Social Security tax that employers and employees each will pay is $9,932.40 ($160,200 x 6.2%). The Medicare component will remain the same at 1.45% of all earnings. Plus, individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly, and $125,000 for married filing separately) will pay an additional .09% in Medicare taxes.
- The cost-of-living increase of $8.7% will be seen for recipients of Social Security Benefits and Supplemental Security Income (SSI).
IRS Announces Annual Inflation Adjustments for Tax Year 2023
- The Standard Deduction increases to $27,700 up $1,800 from the prior year
- The 401(k) limit increases to $22,500 for 2023 up from $20,500 for 2022, with the catch-up limit for individuals aged 50 and above increases from $6,500 to $7,500.
- The SIMPLE IRA limit increases to $15,500, up from $14,000 in 2022
- The IRA limit rises to $6,500 from $6,000 in 2022. The catch-up limit for individuals aged 50 and above will remain the same at $1,000.
- The annual exclusion for gifts will increase to $17,000, up from $16,000 for 2021.
- Estates of decedents who die during 2023 have a basic exclusion amount of $12,920,000, up from $12,060,000 for estates of decedents who died in 2022.
Some are predicting continued high inflation into 2023, while others are more hopeful that we will see the inflation rate closer to the near past of 2.3%. We will keep you informed of changes in policies and rules as they come our way.
If you have any questions regarding these changes or any other tax or accounting related matter, please feel free to give us a call. Putting our client’s and friend’s minds at ease regarding matters like these is why we exist.