As the new year begins, it can be challenging to keep track of all the new investment and tax changes and updates from one year to the next. This information is helpful to have when planning for the year to manage your personal finances effectively.
At Spaugh Dameron Tenny, we understand the importance of starting the new year off in the right place, and that part of our role is anticipating questions from our clients when there are changes in the financial world. Physicians and dentists may find themselves in a similar situation when something is changing or advances are made in the medical and dental fields. Patients expect their practitioners to be ready to answer common questions, dispute false information, and even alleviate fears.
We pride ourselves in providing exceptional service to our clients, including making sure we can address their concerns and questions about changes in the financial marketplace and how it may affect them. One of the ways we can do this is to share financial updates for the coming year. Here are some of the more common financial numbers that we are asked about.
Employees can contribute up to $22,500 to their 401(k), 403(b), or 457(b) plans for 2023. This is $2,000 more than in 2022. Often this number increases due to inflation. For anyone 50 or older in 2023, you will now be eligible for a total contribution of $30,000 ($22,500 + $7,500 catch-up).
Again, like the 401(k) contribution, the amount of earned income you can contribute to a traditional or Roth IRA has increased for 2023. The limit has risen by $500 from $6,000 in 2022 to $6,500 in 2023. Keep in mind that those 50 years old and above in 2023 will be eligible to contribute an additional $1,000.
Homeowners can deduct interest expenses on up to $750,000 of mortgage debt from their taxes. This number is staying the same from 2022 to 2023. The last time the mortgage interest tax deduction changed was in 2018. Prior to that, homeowners could deduct interest on up to $1 million of mortgage debt.
Each year, the amount you can contribute to a Health Savings Account (HSA) is limited. In 2023, you can contribute up to $3,850 if you have individual coverage or up to $7,750 for family coverage. These amounts have risen slightly from 2022 to 2023 - $200 and $450, respectively. For those 55 years and older, you can put in an extra $1,000 in 'catch up' contributions.
The Internal Revenue Service (IRS) announced the gift tax limit for 2023 is increasing from $16,000 to $17,000 per donor, per recipient. Meaning each individual can give a gift of $17,000 to any individual they want with no federal gift tax consequences. Married couples can combine these amounts and make a $34,000 gift to each individual, doubling the impact. These gifts can be made to anyone you choose and are not limited to children, grandchildren, or family. It is also important to note that each individual can make unlimited payments for tuition and medical expenses as long as these payments are made directly to the institution providing the service.
With nonprofits of all sizes relying on volunteers to help them support operations or administer the services they provide, the Internal Revenue Service publishes a standard mileage rate for charities to use for reimbursement purposes. Volunteers of the nonprofit can claim a mileage reimbursement on their personal taxes as a deduction when they are not compensated for their volunteer efforts involving driving their cars. The rate continues to remain at $0.14 per mile.
At first glance, it appears many of the key financial numbers have changed from 2022 to 2023. This is not all that surprising when you consider the overall economy and the current state of the country.
A little perspective:
Finally, if you are concerned about falling into the top income tax bracket and what it means. Let us help you put it into perspective.
In order to fall into the top marginal income tax rate of 37% as a 'Married filing jointly' category, your taxable income will need to exceed $647,850 (in 2022). And remember, taxable income doesn't begin until after you deduct your 401(k), charitable giving, and mortgage interest. With the proper planning, you may be able to avoid the top marginal bracket.
Building the right financial plan for you and your family can be overwhelming, especially when doing it on your own. Our team at Spaugh Dameron Tenny is ready to take the burden off of you and is trained to start by looking at your overall financial picture, then give you options that best match your personal risk comfort level to help you decide the best course of action. A good advisor won't simply tell you what to do. They will listen and analyze your financial history, then guide you through as you choose the strategies that will help you and your family prosper.
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Shane Tenny is the managing partner of Spaugh Dameron Tenny. Along with hosting the Prosperous Doc® podcast, Shane has a true passion for behavioral finance, helping clients and audiences understand how to develop successful strategies based on their unique temperaments. An accomplished and highly engaging speaker, Shane is regularly interviewed for television and podcasts, is actively involved in the Financial Planning Association®, and contributes to industry advisory boards.
