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Will the tax brackets change in 2023 compared to the previous year?

Americans could be looking at a smaller tax bill in 2023 whose salaries haven’t kept up with inflation with the release of updated IRS tax brackets.

IRS tax brackets for 2023

Every year the IRS publishes changes to the tax code and brackets for the following fiscal year. This gives taxpayers the opportunity to kept track of their finances over the course of the next year and plan for any changes that will be making like buying or selling a house, getting married or investing in a retirement account to name a few in order to avoid having a surprise bill from Uncle Sam.

While the percentages that Americans are taxed at in the seven brackets will remain the same, the income level thresholds that determine which one you fall into have been increased to account for inflation to avoid what is known as “bracket creep.” The adjustment announced by the IRS affects more than 60 tax provisions and took effect 1 January 2023, so they do not apply to the 2022 tax returns.

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2023 tax brackets

The seven brackets remain the same 10%, 12%, 22%, 24%, 32%, 35% and 37% which were set after the 2017 Tax Cuts and Jobs Act. However, the income thresholds for tax brackets are adjusted to reflect inflation or the cost of living. This is based on the Chained Consumer Price Index created by the Bureau of Labor Statistics through continuously tracking the changing price of a basket of goods and consumer purchasing behavior in response to that change.

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, it will now be applied to the first $11,000 for a taxpayer filing individually.

Also, the standard deduction will increase in 2023 by $900 to $13,850 for single filer or married but filing separately, by $1,400 to $20,800 for head of households and $1,800 to $27,700 for married taxpayers filing jointly.

An additional standard deduction of $1,500 will apply to those who are either 65 and older or blind, and the amount doubles if both apply to a taxpayer in 2023.

Dependents that can be claimed on another person’s tax return for the 2023 fiscal year are limited to a standard deduction of either $1,250 or your earned income plus $400, whichever is greater. However, the total can’t exceed the basic standard deduction for your filing status.

Single filers & Married couples filing separately$13,850
Married couples filing jointly & surviving spouses$27,700
Head of Household$20,800

Your filing status could save you extra money

There are five categories of filers and conditions apply to the one you should use to file your taxes. The main determiner is your marital status on 31 December of the year for which you are reporting taxes, that will be the one you use for the entire year. It’s possible that more than one filing status applies to you, so the IRS recommends that you use the filing status that will reduce your tax liability the most.

Five US filing statuses:

  • Single: For those who are not married, divorced or legally separated.
  • Married Filing Jointly: Married couples can choose to file a joint tax return. Widow(er)s can also use this in the year their spouse died.
  • Married Filing Separately: Married couples also have the choice of filing separately if it is more financially beneficial.
  • Head of Household: The IRS cautions not to choose the by mistake and special rules apply to qualify for this filing status. Generally, this status applies if you are not married and must have paid more than half the cost of keeping up a home for yourself and a qualifying person.
  • Qualifying Widow(er) with Dependent Child: This status is similar to married filing jointly. It is applicable for only two years and conditions apply.

For more information check the Dependents, Standard Deduction, and Filing Information in Publication 501.

To help taxpayers determine which filing status applies to them the IRS has an online tool “What Is My Filing Status?

Income taxes are progressive

The tax brackets are progressive, so if you file as a single filer and have a taxable income of $50,000, you don’t pay 22 percent on the whole of your taxable income. You would pay 10 percent on the first $11,000 ($1,100.0), 12 percent on the income between $11,000 and $44,725 ($4,047), and then 22 percent on the remaining $5,275 ($1,160.50) for a total of $6,307.50 as opposed to $11,000.

2023 rates by brackets

Single filers & Married couples filing separately
37%for incomes over $578,125
35%for incomes over $231,250
32%for incomes over $182,100
24%for incomes over $95,375
22%for incomes over $44,725
12%for incomes over $11,000
10%incomes of $11,000 or less
Married couples filing jointly
37%for incomes over $693,750
35%for incomes over $462,500
32%for incomes over $364,200
24%for incomes over $190,750
22%for incomes over $89,450
12%for incomes over $22,000
10%incomes of $22,000 or less
Head of Household
37%for incomes over $578,100
35%for incomes over $231,250
32%for incomes over $182,100
24%for incomes over $95,350
22%for incomes over $59,850
12%for incomes over $15,700
10%incomes of $15,700 or less

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