tax tips phrase made from metallic letterpress type on wooden tray
Many retirement changes start in 2023, and more in 2024. Here’s a few that were in the recent update to the Secure Act that came up in 2023. The age for requiring Minimum Distributions (RMD) of retirement plans goes up from 72 to 73. If you turned 72 in 2022, then you still must take your RMD for 2022 by April 1. The excise tax for not taking an RMD on time is dropping from a whopping 50 percent (ouch!) to 25 percent and lower to only 10 percent if the failure is corrected in a timely manner (do it as soon as you discover you missed the RMD date).
There are a couple of incentives for small businesses to start a retirement plan. First, is they can get a tax credit of up to $5,000 for the startup costs of establishing a new plan. Second, they are entitled to another tax credit of $500 per year for 3 years if the new plan has an “automatic enrollment” feature.
Another friendly provision is linking the amount a person can give to a qualified charity from their IRA in leu of taking an RMD to inflation. Currently its capped at $100,000, but that will be going up now. If you are a charitable person, but do not have enough to itemize your deductions any longer, this is a great way to arrange your affairs to minimize the amount of total tax you pay. By giving to your favorite charity(s) directly through your IRA plan administrator, it reduces the amount of your RMD that is taxable. You get the best of both worlds! Standard deduction and still get to take a potentially full deduction for all your charitable contributions!
Dollar limits on retirement plans and IRAs are higher in 2023. The maximum contribution for 401k, 403b, and 457 plans is now $22,500 in 2023. If folks contributing were born before 1974, they can put in an extra $7,500 above that limit. The maximum contribution limit on simple IRAs is $15,500 plus $3,500 for folks aged 50 and older. The maximum contribution limit on traditional IRAs and Roth IRAs increases to $6,500 plus an additional $1,000 catch-up contribution for individuals who are 50 years old or more.
Regular IRA deduction phaseouts start at a little higher level in 2023. Adjusted Gross Income (AGI) of $73,000 to $83,000 for singles and $116,000 to $136,000 for married couples filing jointly. The income ceilings on Roth IRA contributions goes up. Contributions phase out at the AGI of $218,000 to $228,000 for married filing joint taxpayers and $138,000 to $153,000 for singles.
Have you made your full IRA contributions for 2022 yet? You still have time. Up to April 18 this year. The more you sock away not, the more you will have for retirement down the road. An added bonus is purchasing stocks at deflated values today, will reap extra gains to you down the road when their prices come back up.
Have you heard? Prov 20:4 says, “The sluggard does not plow in the autumn; he will seek at harvest and have nothing.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 775-882-4459, on the web at www.BullisAndCo.com, also on Facebook.