Rising inflation has prompted the IRS to increase the contribution limits for tax-advantaged employer savings plans and Individual Retirement Accounts (IRAs) in 2023, the tax agency announced.

The limits for contributions by employees who participate in 401(k) and 403(b) plans, as well as most 457 plans, are $22,500 a year, up from $20,500 in 2022. IRA contribution limits will increase from $6,500, up from $6,000 in 2022. That represents an increase of almost 10 percent.

The catch-up contribution limit for employees aged 50 and over with an IRA will increase to $7,500 from $6,500. That $1,000 figure remains the same, as it is not subject to a cost of living adjustment (COLA).

The IRS also detailed how taxpayers who can deduct contributions to a traditional IRA if they meet certain conditions can also see their deductions be phased out, until they are eliminated, depending on filing status and income. The phase-out ranges for 2023 are:

• For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to between $73,000 and $83,000, up from between $68,000 and $78,000;

• For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to between $116,000 and $136,000, up from between $109,000 and $129,000;

• For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to between $218,000 and $228,000, up from between $204,000 and $214,000; and

• For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

“The income phase-out range for taxpayers making contributions to a Roth IRA is increased to between $138,000 and $153,000 for singles and heads of household, up from between $129,000 and $144,000,” the announcement continued. “For married couples filing jointly, the income phase-out range is increased to between $218,000 and $228,000, up from between $204,000 and $214,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.”

This announcement comes on the heels of the IRS’s recent announcement of its annual inflation-adjusted tax rates for 2023. Those adjustments could result in lower tax bills for some taxpayers, The New York Times reported.

The agency provided details on these and other retirement-related cost-of-living adjustments for 2023 in a separate notice.