The IRS recently made some adjustments to some key tax code parameters for 2023. Inflation will drive up more than 60 various tax provisions including, but not limited to the standard deduction amount and the income threshold where tax rates take effect.
What’s Increasing? And By How Much?
The top marginal tax rate of 37% will now apply to individual income earners above $578,235 and married couples with income of above $693,750 starting next year. That equates to a 7% increase from 2022 under the current inflation adjustment, the IRS announced on Tuesday.
The standard deduction rate for individuals and married couples will climb as well, seeing a 7% increase. $13,850 for individuals, and $27,700 for married couples, this allows taxpayers to shield more of their earnings from income taxes. Lastly, the maximum contribution to a healthcare flexible spending account will rise to $3,050, up from the previous $2,850.
Other Tax Bracket Adjustments
As it stands currently, there are 6 other tax brackets below the top 37% bracket, which all apply to taxable income, AKA income after deductions are taken into account.
For individuals in 2023 the tax brackets are as follows:
- 37%: incomes greater than $578,125
- 35%: incomes over $231,250
- 32%: incomes over $182,100
- 24%: incomes over $95,375
- 22%: incomes over $44,725
- 12%: incomes over $11,000
- 10%: incomes of $11,000 or less
For those married filing jointly, the amounts are as follows:
- 37%: incomes greater than $693,750
- 35%: incomes over $462,500
- 32%: incomes over $364,200
- 24%: incomes over $190,750
- 22%: incomes over $89,450
- 12%: incomes over $22,000
- 10%: incomes of $22,000 or less
Wrap Up
Rising inflation has been a major topic of discussion all year, and the IRS is now taking the necessary actions to reflect this for the 2023 tax year. If you need any assistance in regard to these changes and your tax bracket, contact a trusted professional today.