A wide range of tax-related limits that affect businesses are indexed annually, and due to high inflation, many have increased more than usual for 2023. Here are a few that may be important to you and your business.
Social Security tax
The amount of employees’ earnings that are subject to Social Security tax is capped for 2023 at $160,200 (up from $147,000 for 2022).
Deductions
Section 179 expensing:
- Limit: $1.16 million (up from $1.08 million)
- Phaseout: $2.89 million (up from $2.7 million)
Income-based phase-out for certain limits on the Sec. 199A qualified business income deduction begins at:
- $364,200 (up from $340,100) for married filing jointly
- $182,100 (up from $170,050) for other filers
Retirement plans
Employee contributions to 401(k) plans: $22,500 (up from $20,500)
Catch-up contributions to 401(k) plans: $7,500 (up from $6,500)
Employee contributions to SIMPLEs: $15,500 (up from $14,000)
Catch-up contributions to SIMPLEs: $3,500 (up from $3,000)
Combined employer/employee contributions to defined contribution plans (not including catch-ups): $66,000 (up from $61,000)
Maximum compensation used to determine contributions: $330,000 (up from $305,000)
Annual benefit for defined benefit plans: $265,000 (up from $245,000)
Compensation defining a highly compensated employee: $150,000 (up from $135,000)
Compensation defining a key employee: $215,000 (up from $200,000)
Other employee benefits
Qualified transportation fringe-benefits employee income exclusion: $300 per month (up from $280)
Health savings account contributions:
- Individual coverage: $3,850 (up from $3,650)
- Family coverage: $7,750 (up from $7,300)
- Catch-up contribution: $1,000 (no change)
Flexible spending account contributions:
- Healthcare: $3,050 (up from $2,850)
- Dependent care: $5,000 (no change)
These are only some of the tax limits and deductions that might affect your business, and additional rules may apply. Reach out to a KraftCPAs advisor to find out how these changes could impact your next filing.
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