2023 IRA Contribution Limits Phase Out
As the year 2023 approaches, it is important to understand the IRA contribution limits and how they will be phased out for certain taxpayers. While the Internal Revenue Service (IRS) has not yet announced the exact IRA contribution limits for 2023, it is possible to predict the range of limits that may be in effect. This article provides an overview of the expected 2023 IRA contribution limits and how they are likely to be phased out for certain taxpayers.
2023 IRA Contribution Limits
The IRS has not yet announced the exact IRA contribution limits for 2023, but it is expected that the limits will be similar to the current limits. The current limits for 2020 and 2021 are $6,000 for those under age 50 and $7,000 for those 50 and over. It is likely that the 2023 limits will be in the same range, but the exact limits have yet to be determined.
2023 IRA Contribution Limits Phase Out
For those taxpayers who have a modified adjusted gross income (MAGI) that is above a certain limit, the IRA contribution limits will be phased out. This means that the full contribution limit may not be available to taxpayers who are above the income threshold. The exact income threshold for the phase out of the 2023 IRA contribution limits has yet to be determined, but it is likely to be similar to the current limits. For 2021, the phase out of the contribution limit begins at $124,000 for single filers and $196,000 for joint filers.
Roth IRAs
The phase out of the contribution limit also applies to Roth IRAs. For 2021, the phase out of the contribution limit for Roth IRAs begins at $124,000 for single filers and $196,000 for joint filers. As with the regular IRA contribution limits, the exact income thresholds for the phase out of the contribution limit for Roth IRAs in 2023 have yet to be determined, but it is likely to be similar to the current limits.
Consequences of Exceeding Contribution Limits
Taxpayers who exceed the IRA contribution limits will be subject to a 6% excise tax on the excess contributions each year. This tax is in addition to any taxes that may be due on the excess contributions. Taxpayers who have made excess contributions should consider taking corrective action as soon as possible to avoid additional taxes and penalties.
Taxpayers Who Are Covered by a Retirement Plan at Work
Taxpayers who are covered by a retirement plan at work may also be subject to different income limits for IRA contributions. This is because the deductibility of traditional IRA contributions is phased out for taxpayers whose incomes exceed certain levels. For 2021, the phase out of the deduction begins at $66,000 for single filers and $105,000 for joint filers. The exact limits for 2023 have yet to be determined, but it is likely to be similar to the current limits.
Conclusion
The exact 2023 IRA contribution limits and phase out limits have yet to be determined, but it is likely that they will be similar to the current limits. Taxpayers should keep an eye out for any announcements from the IRS regarding the 2023 contribution limits and plan accordingly. It is also important to note that taxpayers who exceed the contribution limits may be subject to additional taxes and penalties.
2023 IRA Contribution Limits: Planning Ahead
With the 2023 IRA contribution limits approaching, it is important for taxpayers to plan ahead and understand the potential limits and phase out rules that may be in effect. Taxpayers should keep an eye out for any announcements from the IRS regarding the 2023 contribution limits and plan accordingly. By understanding the potential limits and consequences for exceeding them, taxpayers can ensure that they are taking advantage of the best options available to them.