A variety of tax limits that affect businesses are indexed on an annual basis. As a result of high inflation, many of these limits have increased more than usual for 2023.
Here are a few that businesses should keep in mind for 2023:
Social Security tax
For 2023, the amount of employee earnings subject to Social Security tax is capped at $160,200 (compared to $147,000 in 2022).
Deductions
For Section 179 expensing, the limit has increased to $1.16 million (compared to $1.08 million), with a phaseout of $2.89 million (compared to $2.7 million).
Income-based phase-out for certain limits on the Sec. 199A qualified business income deduction begins at $364,200 for married couples filing jointly (compared to $340,100). For other filers, this amount is $182,100 (compared to $170,050).
Retirement plans
Increases for retirement plans are as follows:
401(k) plans
- Employee contributions: $22,500 (compared to $20,500)
- Catch-up contributions: $7,500 (compared to $6,500)
SIMPLE plans
- Employee contributions: $15,500 (compared to $14,000)
- Catch-up contributions: $3,500 (compared to $3,000)
Additional increases
- Employer/employee contributions to defined contribution plans, not including catch-ups: $66,000 (compared to $61,000)
- The maximum compensation used to determine contributions: $330,000 (compared to $305,000)
- The annual benefit for defined benefit plans: $265,000 (compared to $245,000)
- The amount used to define a highly compensated employee: $150,000 (compared to $135,000)
- The amount used to define a key employee: $215,000 (compared to $200,000)
Additional employee benefits
The qualified transportation fringe-benefits employee income exclusion is $300 monthly (compared to $280).
Flexible Spending Account (FSA) healthcare contributions have increased to $3,050 (compared to $2,850). Note that the dependent care contribution limit of $5,000 has remained the same.
Health Savings Account (HSA) contributions have increased as follows:
- Individual coverage: $3,850 (compared to $3,650)
- Family coverage: $7,750 (compared to $7,300)
The catch-up contribution limit of $1,000 has remained the same.
Questions? Smolin can help
These are only some of the tax limits and deductions that could affect your business—and additional rules could apply. If you have questions, our CPAs can help. Contact us to get started.