How can you benefit from the new Income tax brackets for 2023? How do they affect you?

The IRS has released new information for the 2023 tax season regarding deductions, tax rates, and changes to the tax code made under the Inflation Reduction Act. Inflation has impacted the increases as the IRS must account for the ways in which higher prices are impacting disposable income. Without these adjustments, taxation would cut into a household’s purchasing power at different and disproportionate rates each year.

Earned Income Tax Credit

The maximum a taxpayer claiming the Earned Income Tax Credit (EITC) will also see a boost in 2023, rising from $6,935 to $7,430 for those who have three or more children. The EITC offers a tax break to some low and middle-class earners. To determine eligibility, one can use a tool offered by the IRS.

Estate Tax

An exception for the Estate Tax will remain in place, meaning that those who pass away in 2023 will not have to pay tax on their estate if they leave behind less than “$12,920,000, up from a total of $12,060,000 for estates of decedents who died in 2022.”

Standard Deductions

The standard deduction will increase by $1,800 for married couples filing jointly. Single taxpayers will see an increase to “$13,850 for 2023, up $900, and for heads of households, the standard deduction will be $20,800 for tax year 2023, up $1,400 from the amount for tax year 2022.”

Wanna read more, this could be of interest: Standard Deduction for seniors over 65 in 2023: how much will it be with IRS increase?

Marginal Tax Rates

Marginal tax rates refer to the amount charged based on one’s income. These change year to year to adjust for inflation and other economic factors.