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Measures 21-24 in Prelude VII from Bach's Well Tempered Clavier I

I was looking at the Prelude VII by Bach and noticed that on the measure 23 Bach ended that phrase with a Ab maj9 chord. I was wondering how often do extended chords show up in Bach's work. When listening the chord sounded kinda of jazzy. Also I have heard of rules being in place during the Baroque area about dissonant chords so how did this one slip through?

It doesn't end the phrase. The G in the soprano and the Bb in the tenor are suspensions, which resolve downward by step on the next beat. The end of the phrase comes later. The rules you mention about dissonances allow just about anything so long as the parts resolve in a prescribed way.

As for how often rich harmonies like this occur in Bach: they're extremely commonplace. They occur because he was composing from the horizontal perspective (thinking of voice leading, the motion of individual voices) as much as the vertical (thinking of harmonies).

Sometimes he comes up with harmonies that would not be heard again for another couple of centuries, like this extreme example from the end of the chorale prelude Kyrie, Gott heiliger Geist BWV 671:

Analysing this passage purely from the vertical point of view (naming the harmonies) would be a messy sort of fun, but might not be fully enlightening, because the passage is as much about the descending motion of the individual parts.

You can read claims that J. S. Bach thought horizontally, not vertically. That's surely too categorical. His mind is unknowable, so it's anyone's guess how much of his thought was on voice leading, and how much the resulting harmonies. It would surely have varied depending on the style and texture he was writing, too. What's beyond doubt is that he gives us plenty to value in both ways.

It's actually a suspension, which is to say that the actual chord is F Minor (F, A-flat, C, in first inversion) but the G and B-flat are held over from the previous chord before moving to F and A-flat. Dissonant suspensions resolving to consonant chords are very common in Baroque music. In jazz, 9th chords are treated as normal chords, so a G#maj9 might follow a D#maj9 and then be followed by a C#maj9 without suspensions.

I knew someone who didn't like modern music because "the dissonances never resolve." That's a fair criticism, I suppose. Bach can have some absolutely crazy sequences of chords, as in the Grave section of the Toccata, Adagio and Fugue in C major for organ (BWV 564), but they eventually resolve to C major. Ives and Stravinsky pound out the dissonances with no resolution. Modern jazz says, "Hey, these so-called dissonant chords are actually very beautiful. Just listen to them. Really listen." Ravel and Poulenc agree.