401k and IRA Contribution and Deduction Limits for 2023

In 2023, both 401k and IRA contribution limits have gone up. Here are all the details, including IRA deduction limits.

The IRS released the new 2023 401k and IRA contribution and deduction limits. The limits for 401ks jumped by $2,000 to $22,500. Limit contributions for both traditional and Roth IRAs jumped from $6,000 to $6,500.

401(k) Contribution Limits

As announced by the IRS, the contribution limit for 401(k) accounts increased from $20,500 in 2022 to $22,500 in 2023. Those 50 or older also get the catch-up contribution of $7,500. That brings the total contribution limit to $30,000 for those who qualify. These new contribution limits also apply to 403(b), most 457 plans, and the federal government’s Thrift Savings Plan.

IRA Contribution and Deduction Limits

With a deductible IRA, it’s important to understand both the contribution limits and the income limits to qualify for the deduction. While you can always contribute up to the $6,500 contribution limit assuming you have sufficient earned income, you’ll only be able to deduct your contribution on your federal taxes if you meet certain income limits.

IRA Contribution Limits

The maximum contribution in 2023 is $6,500. The catch-up contribution for those 50 and older remains $1,000 (the catch-up contribution for an IRA is not indexed for inflation, so it always remains at $1,000). Here are the IRA contribution limits over the last several years:

Read more: The Ultimate Guide to Roth and Traditional 401(k) and IRA Retirement Accounts

Deductible IRA Income Limits

Now on to the question of whether your IRA contribution is deductible. Whether your IRA contribution is deductible depends on three factors: (1) your filing status, (2) your adjusted gross income, and (3) whether you are covered by a retirement plan at work.

Below are the limits based on whether or not you are covered by a retirement plan at work in 2023:

You Are Covered by a Retirement Plan

In this scenario, if you are covered by a retirement plan at work, you’ll need to know your modified adjusted gross income. Here are the income and phase-out limits based on your tax filing status:

• If you are filing as single or head of household and your MAGI is $73,000 or less in 2023, you can deduct up to the full contribution limit to your IRA. If your income is between $73,000 and $83,000, you can take a partial deduction for your contributions. And if your income is above $83,000, you cannot take a deduction for IRA contributions.
• If you are married filing jointly or a qualifying widow(er), you can take a full deduction if your income is under $116,000. If your income is between $116,000 and $136,000, you can take a partial deduction, and you get no deduction if your income is more than $136,000.
• If you are married filing separately, you can take a partial deduction if your MAGI is less than $10,000, but get no deduction if your income is above that amount.

You Are Not Covered by a Retirement Plan

What if you don’t have a work-sponsored retirement plan to contribute to? In this case, the limits are more relaxed:

• If you are single, head of household, or a qualifying widow(er), you can deduct up to the contribution limit for 2023 when you contribute to a traditional IRA.
• If you are married filing jointly or separately and your spouse also does not have a work-sponsored retirement plan, you can also deduct the full deduction up to the contribution limit.
• If you are married filing jointly and your spouse does have a work-sponsored retirement plan, you can take the full deduction only if your combined MAGI is $218,000 or less. If your MAGI is between $218,000 and $228,000, you can take a partial deduction for IRA contributions. And if your income is above $228,000, you can take no deduction for IRA contributions.

If you are married filing separately with a spouse who is covered by a work-sponsored employment plan, you can take a partial deduction if your MAGI is $10,000 or less. If your MAGI is more than $10,000, you cannot take a deduction at all.

Related: Roth IRA Contribution and Income Limits

SEP IRAs and Solo 401(k)s

Self-employed individuals have a broader range of options they can use for saving for retirement, including SEP IRAs and Solo 401(k)s. These plans allow participants to contribute a higher percentage of their income or dollar amount, and some plans also offer the option to put in employer contributions on behalf of the business.

In 2023, those with a SEP IRA can contribute the lesser of 25% of their total compensation or $66,000. The total compensation limit for 2023 is $330,000. For a Solo 401(k), a business owner can contribute up to $22,500 in 2023 as an employee, or up to $30,000 if they are age 50 or over. Then they can add additional money as the employer–up to 25% of their compensation.

The table below shows these historical changes for SEP IRAs:

Retirement Calculator

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