Estate, Gift and Income Tax Amounts Increase for 2023

The IRS announced the annual inflation increases for various tax provisions that take effect January 1, 2023. The lifetime estate and gift tax exemp- tion increases to $12.92 million (from $11.7 million). A couple can jointly exclude $25.84 million. Gifts of up to $17,000 can be made to any person without being included in 2023’s taxable gifts (up from $16,000 in 2022 and $15,000 in 2021).

The standard deduction for married couples filing jointly is $27,700 (up from $25,100). For single taxpayers, it is $13,850, up from $12,550. Remember, the personal exemption amount was eliminated for years after 2017. The top tax rate of 37% begins at taxable income exceeding $693,750 for married couples filing jointly, or $578,125 for singles. The 24% bracket begins with taxable income of $190,750 for married couples, or $95,375 for singles.

The 22% tax rate begins with taxable income of $89,450 for couples, or $44,725 for singles. The 0% long-term capital gains tax rate applies to married couples filing jointly until income exceeds $89,250, or $44,625 for singles.

The maximum annual tax-deferred contribution to 401(k) and similar plans increases to $22,500 from $20,500. The catch-up contribution for those ages 50 and older rises to $7,500. Total contribu- tions to 401(k) plans (including em- ployer and after-tax contributions) are limited to $66,000.

The contribution limit for both tradi- tional and Roth IRAs increases to $6,500. If you contribute to both types of IRAs, the aggregate contributions can’t exceed $6,500. The catch-up IRA contribution for taxpayers aged 50 and over isn’t indexed for inflation and remains at $1,000.