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FSA & 401(k) Contributions for 2023

November 18, 2022

Taxpayers that participate in employer-sponsored health Flexible Spending Accounts (FSAs) can contribute more in 2023. The annual contribution amount will rise to $3,050 (up from $2,850 in 2022). FSAs allow owners to pay for qualified medical costs with pre-tax dollars. That’s good news if you’re scrambling to keep up with rising costs. FSA owners use a debit card or pay out of pocket for expenses and then seek reimbursement. FSA funds must be used by year end unless an employer elects to allow a 2.5-month carryover (or grace period). For 2023, the amount that can be carried over to the following year will rise to $610 (up from $570 for 2022).

In 2023, individuals will be able to contribute up to $22,500 to their 401(k) plans, the IRS announced. The same is true for 403(b) plans and most 457 plans. This is up from $20,500 in 2022. The increase is part of the cost-of-living adjustments made annually. The catch-up contribution limit for employees age 50 and over who participate in these plans will also rise in 2023 to $7,500, bringing their total allowable contribution to $30,000 per year. For those who own IRA accounts, the limit on annual contributions will rise for 2023 to $6,500 (from $6,000). The IRA catch-up contribution for those age 50 and up remains at $1,000. Find out more by clicking here or contacting our team to discuss.

 

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