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5 tax, investment changes that could boost your finances in 2023

admin by admin
January 1, 2023
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5 tax, investment changes that could boost your finances in 2023
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1. Increased Contribution Limits for Retirement Accounts

If you’re looking to increase your retirement savings, there’s good news for 2023. Contribution limit increase For 401(k) and personal retirement accounts.

In 2023, employee deferral limits will increase from $20,500 to $22,500, and catch-up deposits for savers over 50 will jump from $6,500 to $7,500. These increases also apply to 403(b) plans, most 457 plans, and Thrift Savings Plans.

“This is a big change for a lot of people,” said Brandon Opre, a certified financial planner and founder of TrustTree Financial in Huntersville, North Carolina.

But without reminders from advisors and 401(k) plan providers, these increases “may go undetected,” he said.

IRA contribution limits have also been increased, saving up to $6,500 in 2023 from $6,000 in 2022. The catch-up deposit remains at his $1,000 for 2023, Inflation index beyond 2024.

2. Tax savings from the inflation adjustment bracket

Scott Bishop, CFP and executive director of wealth solutions at Houston-based Avidian Wealth Solutions, said some of the biggest changes in personal finance in 2023 will be linked to inflation. .

For example, the IRS announced “some relief” in October. higher federal income tax bracket As we head into 2023, it means we can earn more before reaching the next tier.

Each parenthesis indicates the federal income tax liability for each portion of “taxable income.” It is calculated by subtracting the greater of standard deductions or itemized deductions from adjusted gross income.

The standard deduction will also increase in 2023, rising from $25,900 in 2022 to $27,700 if the couple files jointly. Single filers say she could claim $13,850 in 2023, a jump from $12,950.

3. Increased threshold for 0% long-term capital gains

If you plan to sell an investment from your taxable portfolio in 2023, it’s unlikely to trigger a long-term capital gains tax claim, experts say.

Based on inflation, the IRS also raised the income threshold For the 0%, 15% and 20% long-term capital gains brackets for 2023, it applies to profitable assets owned for one year or more.

Tommy Lucas, CFP and registered agent for Moisand Fitzgerald Tamayo in Orlando, Fla., recently told CNBC.

Higher standard deductions and income thresholds for long-term capital gains in 2023 will make it more likely to fall into the 0% bracket, Lucas said.

In 2023, taxable income of $44,625 or less for a single person filing and $89,250 or less for a married couple filing together may be subject to the 0% tax rate.

4. Increased Income Cap for Roth IRA Contributions

The 2023 inflation adjustment could also mean more investors could qualify for contributions to the Roth IRA, experts say.

Lawrence Pon, CFP and CPA at Pon & Associates in Redwood City, California, said: Convert pre-tax IRA funds to Roth IRA For future tax-free growth.

“But what about Lot? [IRA] What about donations? ” he said in a speech at the Financial Planning Association. annual convention This marks an increase in the income limit for 2023.

In 2023, more Americans may be eligible. This is because the adjusted gross income phase-out range will be $138,000 to $153,000 for single filers and $218,000 to $228,000 for joint couple filing.

Some investors may seek “complex” moves such as so-called backdoor loss conversions, After-tax 401(k) contributions For the Roth IRA, Pon urges investors to first reconfirm their eligibility to contribute to the Roth IRA.

5. More time for bare bones distribution

On December 23, Congress $1.7 Trillion Omnibus Appropriation Billinclude dozens of retirement benefits Known as “Secure 2.0”.

One of the 2023 provisions will be Minimum required distributionor RMD and must be debited annually from a specific retirement account.

Currently, RMD starts when you turn 72, with the first withdrawal due on 1st April of the following year and subsequent withdrawals due on 31st December. but, Secure 2.0 Shifts Starting Age He will be 73 in 2023 and 75 in 2033.

Nicholas Bunio, CFP of Retirement Wealth Advisors in Berwyn, Pennsylvania, said, “People who are already on RMD won’t be affected, even if you’re 72 now. .

But if you’re young and don’t need RMD, such as Roth’s conversion potential, the change could offer some “great planning opportunities,” he said.

Tags: 401(k) plansboostBusiness newsfinancesfinancial advisorfinancial planFinancial plannerGovernment taxation and revenueinflationinvestmentInvestment strategyNational taxPersonal loanPersonal savingsretirement plantaxTax planningwealth
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