Well, I don’t know about you, but it’s hard to believe it is already December. With 2023 just around the corner, here are some key financial planning figures that might be helpful to keep in mind for the new year:
- Marginal federal tax rates:
For tax year 2023, the top tax rate remains 37% for individual single taxpayers with incomes greater than $578,125 ($693,750 for married couples filing jointly).
The other rates are:
35% for incomes over $231,250 ($462,500 for married couples filing jointly);
32% for incomes over $182,100 ($364,200 for married couples filing jointly);
24% for incomes over $95,375 ($190,750 for married couples filing jointly);
22% for incomes over $44,725 ($89,450 for married couples filing jointly);
12% for incomes over $11,000 ($22,000 for married couples filing jointly).
The lowest rate is 10% for incomes of single individuals with incomes of $11,000 or less ($22,000 for married couples filing jointly).
- The standard deduction for married couples filing jointly for tax year 2023 increases to $27,700, up $1,800 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction increases to $13,850 for 2023, up $900, and for heads of households, the standard deduction will be $20,800 for tax year 2023, an increase of $1,400 from the amount for tax year 2022.
- The Alternative Minimum Tax exemption amount for tax year 2023 is $81,300 and begins to phase out at $578,150 ($126,500 for married couples filing jointly for whom the exemption begins to phase out at $1,156,300). The 2022 exemption amount was $75,900 and began to phase out at $539,900 ($118,100 for married couples filing jointly for whom the exemption began to phase out at $1,079,800).
- Long-term capital gains and qualified dividends continue to be taxed at rates of 0%, 15%, or 20%, depending on your overall taxable income. These figures do not include the 3.8% Medicare surtax on so-called net investment income for singles earning more than $200,000 and couples earning more than $250,000, as mandated under the Affordable Care Act.
- Maximum IRA contributions increase to $6,500 (up from $6,000 in 2022) for those younger than 50 and $7,050 (up from $7000) for those age 50 and up.
- Eligibility income ceilings for Roth IRA contributions increase, with contributions phasing out at adjusted gross income thresholds of $218,000 (up from $204,000) to $228,000 (up from $214,000) for married couples filing jointly and $134,000 (up from $129,000) to $153,000 (up from $144,000) for single filers.
- The annual contribution limit for employees who participate in 401(k), 403(b), and most 457 plans increases to $22,500 (from $20,500) for those younger than 50 and $30,000 (from $27,000) for those age 50 and up.
- The contribution limit on profit-sharing plans and SEP-IRAs increases to $66,000 (from $61,000). For those age 50 and above, the limit increases to $73,500 (from $67,500), but only for those who use profit-sharing plans (SEP-IRAs do not permit so-called “catch-up” contributions),
- The federal estate, lifetime gift, and generation-skipping tax exclusions, which remain uniform and indexed annually to inflation, increase to $12,920,000 per person ($25,840,000 per married couple). After 2025, unless Congress acts, the exclusion amount is scheduled to revert to $5 million (indexed for inflation). The top tax rate remains 40%.
- The annual gift exclusion (the amount you can give to any other person without it counting against your lifetime exclusion) increases to $17,000 (from $16,000).
Source: IRS.gov
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If I can assist you with any financial planning/investment matters, please let me know. Wishing you and your loved ones all the best for holiday season and the upcoming new year.
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