Some important "trigger" income levels for 2023

[Gumby]

CORRECTED TO POST #31

Similar to what I did for the last three years, here is a list of important “trigger” income levels for 2023.

Numbers are actual AGI/MAGI (i.e. - before standard or itemized deductions) unless indicated as Taxable Income by an asterisk * which means you can add $27,700 MFJ/$13,850 single if you use the standard deduction (+ another $1500 per person over 65 or blind if MFJ/ $1850 if over 65 or blind single). Note also that MAGI and AGI are often not the same in different sections of the tax code. If you are close to one of the limits, ensure you know what is and is not included in income for that particular limit. Here is a discussion where the AGI/MAGI distinction was crucial and cost someone $15k. https://www.early-retirement.org/fo...rdable-care-act-plans-115682.html#post2844864

I have put social security taxation levels in a separate post (here https://www.early-retirement.org/fo...-income-levels-2021-a-106300.html#post2506932), because it is a little complicated (not too bad) and highly dependent on exactly how much social security you receive in comparison to your total income. (This links to the 2021 thread, Post #2).

This is based on current law; there may be changes. As with the last three years, this is a collaborative effort, so if you have corrections or additions, please post them here and I will adjust this first post as necessary. Note that this year I have included references at the bottom of the post. If you have a change or addition, it would be helpful to link a reference for it.

Link to 2022 thread is here - https://www.early-retirement.org/fo...-trigger-income-levels-for-2022-a-111659.html


Income level/effect (as of 1/1/2023) This for Married Filing Jointly. Numbers for single taxpayers are listed separately below.

$18,310 -- 100% of FPL (Household of 2, Lower 48) -- minimum income for ACA subsidy in non-Medicaid expansion states (see reference **).

$22,001* - 12% marginal tax bracket for ordinary income

$25,268 -- 138% of FPL (Household of 2, Lower 48) -- minimum income for ACA subsidy in Medicaid expansion states (see reference**).

$42,480 - Maximum two people collecting Social Security prior to FRA can earn ($21,240 each) in W-2 income before Social Security is reduced

$43,501 – Savers Credit drops from 50% to 20%

$47,501 – Savers Credit drops from 20% to 10%

$73,001 – Savers Credit eliminated

$73,240 - 400% FPL -- ACA subsidy reduced to the point where premium can be 8.5% of income (Household of two, Lower 48)(note that ACA subsidy levels are based on the prior year’s poverty levels)

$89,251* - Long term capital gains taxed at 15%

$89,451* - 22% marginal tax bracket for ordinary income.

$116,001 - Begin limiting traditional IRA deduction amounts (if you have a retirement plan at work)

$136,001 - No traditional IRA deductions allowed (if you have a retirement plan at work)

$155,001 - Student loan interest deduction (up to $2500) phaseout begins

$160,001 - Begin phaseout of American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit (LLC) for college costs (note that this is not indexed for inflation)

$180,001 - AOTC/LLC are eliminated

$185,001 - Student loan interest deduction ends

$190,751* - 24% tax bracket

$194,001 - IRMAA Medicare surcharge begins (based on income two years prior. i.e. 2021 income)

$218,001 - Begin limiting Roth contribution amounts

$228,001 - No Roth contributions allowed (consider backdoor Roth)

$246,001 - IRMAA level 2 surcharge

$250,001 - NIIT 3.8% surcharge (note this is not indexed for inflation)

$300,000 - Termination of electric vehicle purchase tax credits

$306,001 - IRMAA level 3

$364,201* - 32% tax bracket

$366,001 - IRMAA level 4

$462,501* - 35% tax bracket

$553,851* - 20% long term capital gains rate

$693,751* - 37% tax bracket

$750,000 – IRMAA level 5



Income level/effect (as of 1/1/2023) This is for Single Filers vv. Numbers for Married Filing Jointly are listed separately above ^^.

$11,001* - 12% marginal tax bracket for ordinary income

$13,590 -- 100% of FPL (Household of 1, Lower 48) -- minimum income for ACA subsidy in non-Medicaid expansion states (see reference**).

$18,755 -- 138% of FPL (Household of 1, Lower 48) -- minimum income for ACA subsidy in Medicaid expansion states (see reference**).

$20,501 – Savers Credit drops from 50% to 20%

$21,240 - Maximum a single person collecting Social Security prior to FRA can earn in W-2 income before Social Security is reduced

$22,001– Savers Credit drops from 20% to 10%

$34,001 – Savers Credit eliminated

$44,626* - Long term capital gains taxed at 15%

$44,726* - 22% marginal tax bracket for ordinary income.

$54,360 - 400% FPL -- ACA subsidy reduced to the point where premium can be 8.5% of income (household of one, Lower 48)

$73,001 - Begin limiting traditional IRA deduction amounts. (if you have a retirement plan at work)

$75,001 - Student loan interest deduction (up to $2500) phaseout begins

$80,001 - Begin phaseout of American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit (LLC) for college costs (note that this is not indexed for inflation)

$83,001 - No traditional IRA deductions allowed. (if you have a retirement plan at work)

$90,000 - Student loan interest deduction ends.

$90,001 - AOTC/LLC are eliminated

$93,375* - 24% tax bracket

$97,001 - IRMAA Medicare surcharge begins (based on income two years prior. i.e. 2021 income)

$123,001- IRMAA level 2 surcharge

$138,001 - Begin limiting Roth contribution amounts

$150,000 - Termination of electric vehicle purchase tax credits

$153,001 - IRMAA level 3 surcharge. Also, no Roth contributions allowed (consider backdoor Roth)

$182,101* - 32% tax bracket

$183,001 - IRMAA level 4

$200,001 - NIIT 3.8% surcharge (note this is not indexed for inflation)

$231,251* - 35% tax bracket

$492,301* - 20% long term capital gains rate

$500,001 - IRMAA level 5

$578,751* - 37% tax bracket



References:
https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2023
https://www.irs.gov/pub/irs-drop/rp-22-38.pdf
https://www.cms.gov/newsroom/fact-s...s-2023-medicare-part-d-income-related-monthly
https://www.ssa.gov/oact/cola/rtdet.html
https://www.irs.gov/retirement-plan...etirement-savings-contributions-savers-credit
https://www.irs.gov/pub/irs-drop/rp-22-34.pdf

https://www.irs.gov/newsroom/401k-limit-increases-to-22500-for-2023-ira-limit-rises-to-6500
https://www.eitc.irs.gov/other-refu...e-education-credits/compare-education-credits
https://www.irs.gov/newsroom/questions-and-answers-on-the-net-investment-income-tax
https://www.healthinsurance.org/obamacare/will-you-receive-an-aca-premium-subsidy/
**https://www.kff.org/medicaid/issue-...medicaid-expansion-decisions-interactive-map/ (Medicaid expansion map. There were measures on the ballot and these could change. Research it.)
https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines See also Post #33 for larger family sizes.
https://www.irs.gov/credits-deductions/credits-for-new-clean-vehicles-purchased-in-2023-or-after

 

[oldtimer]

Thank you Gumby for continuing to update your "trigger" post.

 

[mn54]

thanks gumby. i am sure most everyone on here appreciates you sharing this information.

 

[SJhawkins]

This thread is a good example of how important it is to know precisely what counts in MAGI for your particular issue. https://www.early-retirement.org/for...-a-108104.html

Thanks for posting much appreciated. The above link seems to be stale, at least for me it was a no go.

 

[Gumby]

Thanks for posting much appreciated. The above link seems to be stale, at least for me it was a no go.

Sorry about that. I'll remove that sentence. If I can recreate the link, I'll add it back in.

 

[Dreamer]

Thanks, Gumby. Appreciate it.

 

[Fermion]

For us bottom dwellers there are a few lower end ones you missed.

2022 Federal poverty level (100%) for a couple: $18,310
138% Federal poverty level for maximum ACA subsidy: $25,268
200% Federal poverty level: $36,620 (discount or free internet)

 

[Gumby]

For us bottom dwellers there are a few lower end ones you missed.

2022 Federal poverty level (100%) for a couple: $18,310
138% Federal poverty level for maximum ACA subsidy: $25,268
200% Federal poverty level: $36,620 (discount or free internet)

I have added the minimum income amounts for ACA subsidies. If you would care to elaborate and provide sources for the 128% and 200% issues, I'll consider adding that too.

 

[Midpack]

Thanks once again. I cut-n-paste and save your list every time you update for reference, it’s helpful.

 

[Fermion]

I have added the minimum income amounts for ACA subsidies. If you would care to elaborate and provide sources for the 128% and 200% issues, I'll consider adding that too.

The 138% of poverty level for cost sharing on (silver plan only) ACA plans might be state by state? It is 138% in Washington state, below that level they shunt you over to Applecare (Washington Medicaid).

The 200% of poverty level is the threshold to qualify for the federal Affordable Connectivity Program, which is just a subsidy for internet connections.

"What is the Affordable Connectivity Program?
The Affordable Connectivity Program (ACP) is a U.S. government program run by the Federal Communications Commission (FCC) program to help low-income households pay for internet service and connected devices like a laptop or tablet.

You are likely eligible if your household’s income is below 200% of the Federal Poverty Line"

 

[Gumby]

The 138% FPL level is only for states (like Washington) that have expanded Medicaid eligibility. 11 states have not. The Affordable Connectivity Program has so many situation specific requirements/exceptions that it is really not possible to do it justice in a list like this. Here is a link for those who may be interested.

https://www.usac.org/about/affordab...-eligibility-resources/household-eligibility/


EDIT as of 12/7/22 - Upon further reflection, I went ahead and put in both the 100% and 138% poverty level numbers. You can look in the reference to see if you are in a Medicaid expansion state or not.

 

[Car-Guy]

Useful list to have in one place. Thanks...

 

[SecondCor521]

The 138% FPL level is only for states (like Washington) that have expanded Medicaid eligibility. 11 states have not. The Affordable Connectivity Program has so many situation specific requirements/exceptions that it is really not possible to do it justice in a list like this. Here is a link for those who may be interested.

https://www.usac.org/about/affordab...-eligibility-resources/household-eligibility/

The other difficulty is that FPL varies by tax family size and where you live. So a married couple in New Jersey has a different 138%/200%/etc of FPL dollar values than a married couple in Alaska, or a family of four in Colorado.

So any FPL-based numbers are going to be different dollar-wise even if they're the same percentage-wise.

 

[wdwwildbill]

This is great info .. Thank you so much !!!!!

 

[jollystomper]

Thanks Gumby, this is great to have along with the source links!

 

[teej1985]

The other difficulty is that FPL varies by tax family size and where you live. So a married couple in New Jersey has a different 138%/200%/etc of FPL dollar values than a married couple in Alaska, or a family of four in Colorado.

So any FPL-based numbers are going to be different dollar-wise even if they're the same percentage-wise.

I thought FPL was the same in hte lower 48 and htat only Alaska and Hawaii had different numbers.

 

[SecondCor521]

I thought FPL was the same in hte lower 48 and htat only Alaska and Hawaii had different numbers.

If you hold family size and tax year constant, yes, there are three geographic areas that are different. Which is why I didn't hold family size and geographic area constant in the examples I gave. ;-)

The larger point is that dollar-limit cutoffs related to FPL are too complicated to put in this thread.

What might be workable, if Gumby is up for it, would be to list just the percentages of FPL and what things one qualifies for at various levels, and maybe a link to how to translate percent-of-FPL to a dollar figure for a given geographic area, tax year, and family size.

Something like the following (which is from memory and not researched, so don't nitpick the exact data, it's just to give an idea):

"133%/138% - qualify for ACA subsidies
150% - CSR94
200% - CSR87
- NY Essential Plan cutoff
250% - CSR73
400% - top of cliff, gone through 2025

How to convert percent-of-FPL to dollar figure: See IRS Pub 8962 (link)"

 

[ownyourfuture]

Much appreciated Gumby. Thank you.

 

[USGrant1962]

I also really appreciate the effort, Gumby. I have a part time consulting gig and about this time every year I am turning dials based on this list. If my income is approaching certain cliffs or step functions I calibrate it by funding my solo 401(k) or other steps.

And there is so much going on in the tax code that laying it out like this in a linear manner really highlights the true marginal tax implications of increased income. They are much more than advertised for many people due to phase-outs and such (AKA stealth taxes).

Thank you Sir!

 

[Koolau]

CORRECTED TO POST #8

Similar to what I did for the last three years, here is a list of important “trigger” income levels for 2023.



$194,001 - IRMAA Medicare surcharge begins (based on income two years prior. i.e. 2021 income)

If I wanted to "push it" and this year take as much as possible (from my 401(k)) without paying premium IRMAA surcharge in 2024 (based on MAGI in THIS year - 2022), what would be a fairly safe "bet" for actual MAGI limit in 2022?

IIRC 8% inflation would increase the number to around $209K. IF my math is correct, I'd still not push it that far. Maybe $205K?? Any thoughts on this? Heh, heh, I actually have a reason for asking. Any help appreciated.

 

[Gumby]

If I wanted to "push it" and this year take as much as possible (from my 401(k)) without paying premium IRMAA surcharge in 2024 (based on MAGI in THIS year - 2022), what would be a fairly safe "bet" for actual MAGI limit in 2022?

IIRC 8% inflation would increase the number to around $209K. IF my math is correct, I'd still not push it that far. Maybe $205K?? Any thoughts on this? Heh, heh, I actually have a reason for asking. Any help appreciated.

I have always found The Finance Buff to be accurate in his predictions. He presents two different scenarios for 2022 income limits (for 2024 coverage) - one assuming 0% inflation between now and next August and one assuming 5% inflation between now and next August. In the first instance, the first IRMAA limit will be $204k for MFJ. In the second, it will be $208k. I would split the difference. https://thefinancebuff.com/medicare-irmaa-income-brackets.html#htoc-2024-irmaa-brackets

 

[SecondCor521]

If I wanted to "push it" and this year take as much as possible (from my 401(k)) without paying premium IRMAA surcharge in 2024 (based on MAGI in THIS year - 2022), what would be a fairly safe "bet" for actual MAGI limit in 2022?

IIRC 8% inflation would increase the number to around $209K. IF my math is correct, I'd still not push it that far. Maybe $205K?? Any thoughts on this? Heh, heh, I actually have a reason for asking. Any help appreciated.

When faced with a similar situation, someone here, I think @pb4uski, recommended thinking about the situation in the following way:

There is some benefit to getting as close to the threshold as possible. In this case, realizing income at a desirable tax bracket. This benefit is probably calculable in some fashion.

There is some drawback to going over the threshold. In this case, the next IRMAA surcharge. This cost is also calculable in some fashion.

When deciding how close to get, looking at the magnitude of these costs and benefits (and perhaps whether the limit is "cliffy", as IRMAA is) to help make the trade-off decision.

In my similar situation, I was also wanting to get as close as possible. I was looking at a FAFSA cliff, where going over was quite costly and painful. Going under just meant losing out some Roth conversions that I wanted to do, but realistically could be done over future years. Analyzing things in the above way made me realize that I was fine being somewhat under the cliff.

...

Another trick that could work in some circumstances is to plan to go over the limit slightly, and then trim one's AGI with either IRA or HSA contributions in the spring. This, of course, requires being IRA or HSA eligible, and not being too much over, and having available contribution space. This idea won't work in your situation because of the timing - you won't know the 2022->2024 IRMAA limits in the spring of 2023 either.

 

[Gumby]

A very practical approach.

 

[Koolau]

I have always found The Finance Buff to be accurate in his predictions. He presents two different scenarios for 2022 income limits (for 2024 coverage) - one assuming 0% inflation between now and next August and one assuming 5% inflation between now and next August. In the first instance, the first IRMAA limit will be $204k for MFJ. In the second, it will be $208k. I would split the difference. https://thefinancebuff.com/medicare-irmaa-income-brackets.html#htoc-2024-irmaa-brackets

Many thanks. This is what I was hoping to find. Much aloha.

 

[Koolau]

When faced with a similar situation, someone here, I think @pb4uski, recommended thinking about the situation in the following way:

There is some benefit to getting as close to the threshold as possible. In this case, realizing income at a desirable tax bracket. This benefit is probably calculable in some fashion.

There is some drawback to going over the threshold. In this case, the next IRMAA surcharge. This cost is also calculable in some fashion.

When deciding how close to get, looking at the magnitude of these costs and benefits (and perhaps whether the limit is "cliffy", as IRMAA is) to help make the trade-off decision.

In my similar situation, I was also wanting to get as close as possible. I was looking at a FAFSA cliff, where going over was quite costly and painful. Going under just meant losing out some Roth conversions that I wanted to do, but realistically could be done over future years. Analyzing things in the above way made me realize that I was fine being somewhat under the cliff.

...

Another trick that could work in some circumstances is to plan to go over the limit slightly, and then trim one's AGI with either IRA or HSA contributions in the spring. This, of course, requires being IRA or HSA eligible, and not being too much over, and having available contribution space. This idea won't work in your situation because of the timing - you won't know the 2022->2024 IRMAA limits in the spring of 2023 either.

Thanks so much.

Don't you just hate the "cliffs" and "mine fields" of all the various tax, MC and other gummint rigamarole. Makes me very thankful for this site! Aloha