Finally, some good news from the IRS. They recently released details regarding adjustments to 2023 taxes in response to inflation. These changes will affect most filers and might actually increase your take-home pay. Here we’ve recapped the key takeaways to help you plan to make the most of these tax adjustments. Though you won’t reap the rewards until you file in 2024, it’s always a good time to share positive economic news.
Every Tax Bracket is Changing in 2023
Each year there are adjustments to the tax rates to account for inflation. But this year, there are more dramatic changes to the income thresholds that place you in an income tax bracket. That means many people will be taxed at lower rates. These changes for for taxes due in April 2024.
The Changes
| Single Filers | ||
|---|---|---|
| Tax bracket | 2022 | 2023 |
| 10% | $0 - $10,275 | $0 -$11,000 |
| 12% | $10,276 - $41,775 | $11,001- $44,725 |
| 22% | $41,776 - $89,075 | $44,726 - $95,375 |
| 24% | $89,076 - $170,050 | $95,376 - $182,100 |
| 32% | $170,051 - $215,950 | $182,101 - $231,250 |
| 35% | $215,951 - $539,900 | $231,251 - $578,125 |
| 37% | $539,901+ | $578,126+ |
| Married, Filing Jointly | ||
|---|---|---|
| Tax bracket | 2022 | 2023 |
| 10% | $0 - $20,550 | $0 - $22,000 |
| 12% | $20,551 - $83,550 | $22,001 - $89,450 |
| 22% | $83,551 - $178,150 | $89,451 - $190,750 |
| 24% | $178, 151 -$340,100 | $190,751 - $364,200 |
| 32% | $340,101 - $431,900 | $364,201 - $462,500 |
| 35% | $431,901 - $647,850 | $462,501 - $693,750 |
| 37% | $647,851+ | $693,751+ |
| Married, Filing Separately | ||
|---|---|---|
| Tax bracket | 2022 | 2023 |
| 10% | $0 - $10,275 | $0 - $11,000 |
| 12% | $10,276- $41,775 | $11,001 - $44,725 |
| 22% | $41,776- $89,075 | $44,726 - $95,375 |
| 24% | $89,076 -$170,050 | $95,376- $182,100 |
| 32% | $170,051 - $215,950 | $182,101- $231,250 |
| 35% | $215,951- $323,925 | $231,251- $346,875 |
| 37% | $323,926+ | $346,876+ |
| Head of Household | ||
|---|---|---|
| Tax bracket | 2022 | 2023 |
| 10% | $0 - $14,650 | $0 - $15,700 |
| 12% | $14,651- $55,900 | $15,701- $59,850 |
| 22% | $55,901 - $89,050 | $59,851 - $95,350 |
| 24% | $89,051 -$170,050 | $95,351- $182,100 |
| 32% | $170,051 - $215,950 | $182,101- $231,250 |
| 35% | $215,951- $539,900 | $231,251- $578,100 |
| 37% | $539,901+ | $578,101+ |
How It Affects You
If your salary has increased year over year, you might still slip into a higher bracket. If your salary is similar in 2022 and 2023, you’ll see more money in your paycheck.
Changes to Standard Deductions
Approximately 90 percent of tax filers take a standard deduction, which is a flat rate that reduces that year’s taxable income. Another option is to itemize your deductions.
How the Standard Deduction Will Change for 2023
For the 2023 tax year, the standard deduction increases to:
- $13,850 for single filers (an increase of $900)
- $20,800 for head of household filers (an increase of $1,400)
- $27,700 for married couples filing jointly (an increase of $1,800)
- $13,850 for married couples, filing separately (an increase of $900)
You Can Contribute More to Retirement
If you participate in a 401(k), 403(b) or a 457 plan, you will be able to contribute up to 10% more in most of these plans. But note that your IRA deduction could be reduced or phased out based on your income and filing status.
What’s changing with retirement account contributions in 2023?
The higher cost of living makes it tougher to save for retirement. But if you find yourself with money to spare, contribution limits for workplace retirement accounts will increase $2,000 from 2022. The limit to contribute to your retirement account in 2023 will be $22,500. If you have an IRA, the annual contribution limit increases by $500 to $6,500. Small business owners also catch a break, with the “catch-up” contribution increasing from $3,000 to $3,500. For filers over 50, the “catch up” contribution will increase from $6,500 to $7,500. Get more of the highlights here.
Additional 2023 tax year benefits:
- The Alternative Minimum Tax exemption amount for tax year 2023 for single filers is $81,300 and begins to phase out at $578,150 ($126,500 for married couples filing jointly for whom the exemption begins to phase out at $1,156,300). The 2022 exemption amount was $75,900 and began to phase out at $539,900 ($118,100 for married couples filing jointly for whom the exemption began to phase out at $1,079,800).
- The maximum Earned Income Tax Credit amount is $7,430 for qualifying taxpayers who have three or more qualifying children, up from $6,728 for tax year 2022.
- The monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking increases to $300, up $20 from the limit for 2022.
- The dollar limitation for employee salary reductions for contributions to health flexible spending arrangements increases to $3,050.
We’re here to help you prepare for and navigate these changes well before you file in 2024. Now is the time to start planning your 2023 tax strategies in order to make the most of the IRS’ changes to 2023 taxes.
Recent Comments