The IRS announced it is making changes to many of their rules to help absorb inflation impact, which includes shifts to 2023 income tax brackets and adjustments to standard deductions. This could lead to big savings for taxpayers.
As explained by CBS news, higher limits spell out “bracket creep” avoidance which can affect workers whose pay was slightly boosted to account for cost-of-living increases.
Taxpayers will file their 2023 tax returns in early 2024.
The standard deduction is used by people who don’t itemize their taxes, and it reduces the amount of income you must pay taxes on.
For married couples, the standard deduction will be bumped to $27,700, up from $25,900 in the current tax year. That’s an increase of $1,800, or about 7%.
Single taxpayers and married individuals filing separately, will see the standard deduction go from $12,950 to $13,850. Lastly, heads of households’ standard deduction go to $20,800 from $19,400 this year.
As far as tax brackets, they will increase by 7% for each type of tax filer, with the top marginal rate staying put at 37% for individual single taxpayers with incomes above $578,125 or for married couples with income higher than $693,750.
For those making $11,000 or less and married couples earning $22,000 or less, the tax rate will remain at 10%.
Wealthier Americans will see a bigger tax break in 2023. The IRS will allot up to $12.92 million in exemptions from the estate tax, an increase of about $12.06 million for people who died in 2022.