Jamison, a wealth advisor at EWA, discusses how high inflation numbers in the current year, though challenging for consumer spending, will have positive implications for taxes in 2023. He outlines eight notable changes in the tax code due to this year’s inflation:
The 37% tax bracket for married filing jointly couples increases from $647,000 to $750,000.
The Social Security tax threshold rises from $147,000 to $155,100.
The standard deduction for married filing jointly filers increases to $27,700.
The estate exemption increases from $12.6 million to $12.93 million.
The annual gifting exclusion goes up from $16,000 to $17,000.
IRA contribution limits increase to $6,500 for those under 50 and $7,500 for those over 50.
The HSA contribution limit rises to $7,750 for married filing jointly filers.
Elective deferral limits for employer retirement accounts increase to $22,500 for those over 50, and the 401(k) limit rises to $66,000.
Jamison encourages viewers to reach out for personalized guidance on how these changes may impact their financial plans.
Hi. I’m Jameson, a wealth advisor with EWA. In this video, we’re going to talk about how high inflation numbers this year, although it has been bad for consumer spending and how much money you’re spending on a monthly basis is really good for your taxes in 2023 and what changes will be coming into affect next year to the tax code based on this year’s inflation number.
So here are eight of the most notable changes to how inflation will impact your 2023 taxes. The first one for a married filing joint couple. The 37% tax bracket, which currently starts around 647,000, will now increase to 693,000 $750,000.
That will be the starting point of the 37% tax bracket and that will work. Every tax bracket below that will also see a little bit of an increase, but 37% will jump up about $50,000 before that kicks in.
Second notable change is the Social Security tax which is currently 6.2% of your paycheck. That gets deducted currently on the first 147,000 of your earnings. And this next year will increase to the first $155,100 that Social Security tax will come out of.
Third one is for again Mary filing jointly tax filer. The standard deduction will bump up to $27,700. Currently it’s $25,900, so almost a $2,000 increase. Fourth is the estate exemption will jump up from 12.6 million to twelve point 93 million.
So a married filing jointly couple could get an additional almost $2 million that will fall under the estate exemption. The fifth change, right along lines with estate planning is the annual gifting exclusion, which this year is $16,000 per year, can be gifted without being reported.
Next year will increase to 17,000. The 6th one is for IRA contributions, currently $6,000 per year. And this is for if you’re under the age of 50, it will bump up. You’ll get an extra $500 that you can contribute into an IRA to $6,500.
If you’re over the age of 50, the catch up contribution still remains at $1,000. You’ll be able to do $7,500 into an IRA. 7th is for a health savings account for Mary filing joint Tax filer. The HSA contribution limit this year $7,300.
Next year will increase to 77 50 that can go into a health savings account and the Eigth, which will apply to your any employer retirement account. The Elective deferral this year is 20,500. You’ll get an extra $2,000 to 22,500 if you’re over the age of 50.
The catch up contribution, which is currently $6,500, will go up to $7,500. So if you’re over the age of 50, your deferral contributions can be $30,000 per year and along the lines with your employer retirement account.
The four one five C limit currently is 61,000. That’s the total amount that can go into a retirement plan with your contributions and with your employer’s contributions will increase to $66,000. An extra $5,000 can go into employer retirement plans.
These are just eight common notable changes. Obviously, there will be changes across the board for tax brackets, limits that can go into certain retirement or health accounts like FSHS day. But if you have any questions on how this will directly impact your financial plan, feel free to reach out and we’re happy to help.