FINANCIAL NEWS
Tax season 2023: what are the federal tax brackets for this year?
The thresholds have not changed for 2023 and are not changing for at least another two years.
Joy of joys, it is tax season next week. From 23 January you can complete the fun-filled task of filling out your tax returns for last year. To make things even more exciting the IRS has briefed that there will be fewer tax rebates this year compared to the last two seasons due to government support for the pandemic period drying up.
No changes to tax brackets
The seven brackets remain the same this year 10%, 12%, 22%, 24%, 32%, 35% and 37% which were set after the 2017 Tax Cuts and Jobs Act. These will be in place through the 2025 fiscal year.
The annual adjustment is designed to avoid “bracket creep” when people are pushed into a higher income bracket or inflation reduces the value of other deductions or credits. So, for example instead of 10% being applied to the first $10,275 of income as in 2022, it will now be applied to the first $11,000 for a taxpayer filing individually this year.
Changes come to standard deduction
The term ‘standard deduction’ is the earnings threshold below which you will not have to pay tax on your income.
The standard deduction increases in 2023 is $13,850 for single filer or married but filing separately, $20,800 for head of households and $27,700 for married taxpayers filing jointly.