New inflation adjusted amounts for 2023

Annually, the IRS adjusts many amounts and limitations for inflation. Below are a few of the adjusted amounts for 2023.

Standard deduction
For 2023, the standard deduction will be $27,700 for married couples filing jointly; $13,850 for single taxpayers and married individuals filing separately; and $20,800 for heads of households. As compared to 2022, these amounts are up $1,800, $900, and $1,400, respectively.

Health flexible savings accounts (FSA)
For the tax years beginning in 2023, the dollar limitation for employee salary reductions for contributions to health FSAs increases $200 to $3,050. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $610, an increase of $40 from 2022.

Health savings accounts (HSA)
For single people, the HSA contribution limit will increase from $3,650 in 2022 to $3,850 in 2023. Family coverage will increase from $7,300 to $7,750. Those 55 and older can contribute an additional $1,000 as a catch-up contribution.

Foreign earned income exclusion
For tax year 2023, the foreign earned income exclusion is $120,000 up from $112,000 in 2022.

Unified credit against estate tax
Estates of decedents who die during 2023 have a basic exclusion amount of $12,920,000 (up from $12,060,000 in 2022).

Annual gift tax exclusion
The annual exclusion for gifts increases to $17,000 for calendar year 2023, up from $16,000 for 2022.

Adoption credit and exclusion for adoption assistance
The maximum credit allowed for adoptions in 2023 is $15,950, (up from $14,890 for 2022). Employees who receive adoption assistance can exclude from income up to $15,950 of such assistance.

Retirement contributions
Next year, the contribution cap for employees who participate in 401(k) and 403(b) plans is going up by almost 10 percent, increasing to $22,500 in 2023, up from $20,500. If you are 50 or older, you will be able to contribute an extra $7,500 in 2023, compared with the current $6,500.

For Traditional and Roth IRAs, the annual contribution limit jumps from $6,000 to $6,500. The IRA catch-up contribution limit remains at $1,000.

The amount an employee can contribute from their salary to a SIMPLE IRA or SIMPLE 401(k) cannot exceed $15,500 in 2023, up from $14,000 in 2022. The catch-up contribution for SIMPLE IRA participant will rise by $500 to $3,500.