3 Tips on How to Benefit from Tax Changes 401K and IRA

I recently made an entire article that walks you through everything you need to know about upcoming tax changes for 2023. I'm so happy that you found that information helpful.

Tax Changes for Retirement accounts

tax law changes for retirement accounts such as IRAs and 401ks to clarify whether these changes are for the tax year 2023. About 60 million people in the United States are active participants in 401K plans and approximately 50 percent of all employees across the United States participate in their employer-sponsored program, so I know there are so many of you who need to know what's going on what's going to happen next year in this article we'll go over contribution and catch-up contribution limits we'll cover new income limits as well. At the end of this article, I will share with you three tips that will help you lower your tax bill next year.

How To Lower Your Tax Bill

That these cost of living adjustments might actually push you into a higher tax bracket so make sure that you stay tuned for that information please keep in mind that these changes are not tax credits or some type of gift from the IRS this is just an annual cost of living adjustment and because inflation is so incredibly High the adjustment approved this year is just much bigger than at any point previously let's start with contribution limits first let's talk about 401K accounts the contribution limit for employees who participate in 401(K) 403(B) most 457 Plan and the federal government's THRIFT Savings Plan is increased to $22,500 this is up from $20,000 and 500 essentially the IRS is increasing the limit by two thousand dollars for 2023.

If you contribute to an individual retirement account IRA next year you will be able to put away an extra 500 in it the limit on annual contributions to an IRA increased to $6,500 dollars this is up from the $6,000 dollars the IRA catch-up contribution limit for those who are 50 years old and over isn't typically adjusted and it does remain the same one thousand dollars in 2023 employees will also have a total annual limit of matching dollar contributions of 66,000 dollars which is a five thousand dollar increase from 61,000 dollars this year

Catch-up Contributions limits

Let's chat about catch-up contribution limits the catch-up contribution limit for employees aged 50 and over who participate in 401(K) 403(B) most 457 plans and the federal government's THRIFT Savings Plan has increased to $7,500 is an increase from $6,500 as of 2022.

Essentially this means that participants in these accounts can contribute up to thirty thousand dollars per year into these retirement accounts starting in 2023. The catch-up contribution limit for employees aged 50 and over who participate in simple plans it also increased it increased to 3,500 dollars up from 3,000 dollars.

Income Limits

Income limits for Roth IRA contributions will increase in 2023 as well the income phase-out range for Roth IRAs will be between 138,000 and 153,000 for single filers and heads of households, and this is a significant increase from 129,000 and 144,000 range the range for married couples filing jointly goes up to 218,000 dollars to 228,000 dollars from between $204,000 and $214,000 dollars the phase-out range for married individuals filing separately remains at 0 dollars to 10,000 dollars

That I walked you through new contribution catch-up contribution and income limits, I want to quickly talk to you about how you can use all of this information that I just shared with you to save money on taxes the first tip for you to consider is

• Adjusting your tax withholding or estimated quarterly tax payments

This is very, very important, and it is an easy thing to do with the increase in the income tax brackets this year you may be able to keep more of your money if your income increases next year you may not notice much of a tax difference at all the next tip is you're going to want to

• Max out your retirement accounts (if you can)

If you have an opportunity to put extra money aside for later, take advantage of the increased contribution limits for retirement accounts maximizing contributions will help you reduce your taxable income. And in turn, this could allow you to drop into a lower tax bracket, or it will help keep you from pushing up into a higher tax bracket in 2023. so definitely try not to miss this one the third and last tip in this article is for those who may want to

• Converting part of an IRA to a Roth IRA

In a Roth conversion, you pay taxes on the money that your Investments earned in the original IRA and on any contributions you deducted on your taxes but then your Investments grow tax-free and that is a major benefit of course if you follow all the withdrawal rules.