Filers whose salaries have not kept pace with inflation could see savings on their federal income tax bills.
The rapidly rising cost of food, energy, and other daily staples could allow many Americans to reduce their tax bills next year.
Tax rates are adjusted for inflation, which typically means incremental movements in the thresholds for what income is taxed at what rate. But after a year that brought America’s fastest price growth in four decades, the shift in rates is far more notable: an increase of about 7 percent.
Tax Table Changes
Marginal Rates: For the tax year 2023, the top tax rate remains 37% for individual single taxpayers with incomes greater than $578,125 ($693,750 for married couples filing jointly).
The other rates are:
- 35% for incomes over $231,250 ($462,500 for married couples filing jointly)
- 32% for incomes over $182,100 ($364,200 for married couples filing jointly)
- 24% for incomes over $95,375 ($190,750 for married couples filing jointly)
- 22% for incomes over $44,725 ($89,450 for married couples filing jointly)
- 12% for incomes over $11,000 ($22,000 for married couples filing jointly)
- 10% for incomes of $11,000 or less ($22,000 for married couples filing jointly)
The inflation adjustment will also affect other parts of the tax code. Those include the standard deduction Americans can claim on their tax returns.
The standard deduction will rise to $27,700 for couples, an increase of $1,800 from this year. For individuals, it will be a $900 increase to $13,850.
The earned-income tax credit for low-income workers will be worth as much as $7,430 (for qualifying taxpayers with three or more children), up from $6,935 this year.
Benefits for tax-free public transit and parking costs will rise to a maximum of $300 a month for commuters, up $20 from this year.
And heirs of wealthy individuals who die in 2023 will not need to pay estate taxes on the first $12,920,000 they inherit — an increase of nearly $1 million from the exclusion for the estates of people who die this year.
Other items affected are the medical spending account limits, the foreign earned income exclusion, annual exclusion for gifts, and the maximum credit allowed for adoptions.
Sourced from the New York Times and the IRS newsroom.