An unprecedented move in the agency’s history, and a possible signal of hard times on the horizon.
In an unprecedented move to combat anticipated hardships of inflation, on Oct. 18, the IRS announced a number of adjustments for 2023, including adjustments to the 2023 annual limits on tax-qualified retirement plans as a means of allowing participants more savings.
The IRS also announced adjustments to annual contribution and carryover limits for healthcare flexible spending accounts (FSAs) and the monthly limit for qualified transportation fringe benefits.
Following release of the 2023 inflation adjustments for health savings accounts (HSAs) and high deductible health plans, the IRS did not increase the annual contribution limit for dependent care FSAs because that limit is not indexed to inflation; however, the 2023 inflation adjustments for tax-qualified retirement plans are expected to be announced soon.
The HSA limit for self-only/family coverage will increase to $3,850 and $7,550, respectively for 2023. The maximum annual out-of-pocket expense limits for high deductible health plans for self-only and family coverage also will increase in 2023.
Relatedly, the IRS announced 2023 cost-of-living adjustments (COLAs), including adjustments to the dollar limitations for qualified retirement plans. All dollar limits – including elective deferral contribution limit for 401(k), 403(b) and 457(b) plans, the annual compensation limit under 401(a)(17), the maximum annual contribution limit under Code Section 415(c), and the dollar limit for catch-up contributions (if age 50 or older) – will increase from 2022 limits.
As small business owners prepare for tax season, including working with their employees to answer questions with these changes, NSBA encourages checking in with tax advisors to ensure maximum advantage of contribution limits in 2023.
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