Financial Planning

FINANCIAL planning

2023: By the Numbers


Izabela Camacho, MBA, CFTA
Assistant Vice President
Trust Officer
513-228-7675
icamacho@LCNB.com
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New Year usually brings a few changes to Estate Planning. One of these is the IRS adjustments based on inflation. This year those changes are more noticeable due to higher-than-usual inflation.

Among the most significant changes affecting us this year are income tax brackets. The good news is that some may see a smaller tax bill this year due to the increase in the tax brackets.

There are many additional changes involving tax deductions and credits, so it is beneficial to contact your CPA now to start planning for the 2023 tax season. The goal is to adjust your tax withholding, so you don't owe anything and get nothing from IRS. Getting a refund check only means that you gave the government an interest-free loan.

Tax Rate 2023 Brackets 2022 Brackets
37% Income over $578,125 ($693,750 for married couples filing jointly) Income over $539,900 ($647,850 for married couples filing jointly)
35% Income over $231,250 ($462,500 for married couples filing jointly) Income over $215,950 ($431,900 for married couples filing jointly)
32% Income over $182,100 ($364,200 for married couples filing jointly) Income over $170,050 ($340,100 for married couples filing jointly)
24% Income over $95,375 ($190,750 for married couples filing jointly) Income over $89,075 ($178,150 for married couples filing jointly)
22% Income over $44,725 ($89,450 for married couples filing jointly) Income over $41,775 ($83,550 for married couples filing jointly)
12% Income over $11,000 ($22,000 for married couples filing jointly) Income over $10,275 ($20,550 for married couples filing jointly)
10% Income over $11,000 ($22,000 for married couples filing jointly) Income over $10,275 ($20,550 for married couples filing jointly)

Below are a few other changes for the 2023 year that may affect you:
              - Increase the maximum allowable contribution to 401(k) or 403(b) to $22,500 with additional $7,500 catch-up contributions if you are                    50 or older;
              - Increase the maximum allowable contribution to Health Savings Accounts (HSA) from $3,650 for individuals ($7,300 for families) to                        $3,850 for individuals ($7,750 for families). Plus a $1,000 catch-up contribution over 50.
              - IRA contribution limits increased to $6,500 for both Traditional and ROTH IRAs, with an additional $1,000 catch-up contribution if you                    are 50 or older.
Remember that maximizing your contribution is an excellent planning and tax savings tool!
              - Additionally, the Annual Exclusion for gifts increases to $17,000 for the calendar year 2023, up from $16,000 in 2022. Estates of                              decedents who die during 2023 will have a Basic Exclusion amount of $12,920,000, up from $12,060,000 in 2022.

For more changes, please visit: https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2023.

In addition to the above-referenced changes, congress passed the SECURE ACT 2.0. One of the most significant impacts of this bill is the increase of age individuals must start taking the Required Minimum Distribution from their IRA or other retirement accounts from age 72 to 73 beginning January 2023.

IRS is also working on finalizing the approval of the Inherited IRA rule update from the original SECURE ACT 2019 for some beneficiaries. Initially, certain heirs, known as "non-eligible designated beneficiaries," had to deplete inherited retirement accounts within ten years. This is known as the "10-year rule." IRS proposes requiring an annual RMD if the original owner has already reached their "required beginning date," but the calculation details are still pending. We are monitoring the changes and will notify current Inherited IRA beneficiaries that might be affected if this change occurs.

Please mark your calendars for Tax Day – April 18th, 2023! Don't hesitate to contact your Trust Administrator to schedule an appointment if you have additional questions. Have a Happy and Prosperous 2023!

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