The IRS Is Letting You Keep More Money in 2023, Increasing Standard Deductions for Inflation

Posted on : October 19, 2022

The IRS has some good news for Americans struggling with rampant inflation: You may get to keep more of your money in 2023.

Zelle Facebook Marketplace Scam: How To Recognize and Avoid This Scam
Find: 9 Bills You Should Never Put on Autopay

Due to the increasing costs of food, gas and utilities — the highest spikes in 40 years, per NPR — the government is offering a bit of a reprieve. The IRS is not only adjusting the tax brackets for millions of Americans as of 2023 (upping them by roughly 7%, according to The New York Times), but also increasing the standard deductions that can be taken, thereby reducing a person’s taxable income.

While the government looks at adjustments on an annual basis, the latest tax update is relatively significant, and will likely affect people in all income tax brackets, NPR indicated. In fact, as GOBankingRates previously reported, the 2022 adjustment for inflation was just 3.1%, making the 2023 updates over twice the size.

Here’s how those standard deduction increases break down:

  • Single taxpayers (and married spouses filing separately) will have a standard deduction of $13,850 (a $900 increase).

  • Married couples filing jointly will have a standard deduction of $27,700 (a $1,800 increase).

  • Heads of households will have a standard deduction of $20,800 (a $1,400 increase).

The standard deduction is a “specific dollar amount that reduces the amount of income on which you’re taxed” according to the IRS.

Tax Bracket Changes for the 2023 Tax Year

The other big change to taxes for the 2023 filing year is that brackets are changing. So, coupled with the standard deduction that brings down taxable income, the percentage of taxes owed is shifting to different tiers, again translating to savings for millions of Americans.

The top bracket, in which a 37% tax rate will apply, is now $578,125 and above for individuals and $693,750 and above for married couples filing jointly, which is about $40,000 more than the 2022 figures, per The New York Times.

The 35% tax bracket, in 2023, will apply to earnings of $231,250 and above and $462,500 for married couples filing jointly.

The 32% tax bracket will start for individual incomes of $182,100 and $364,200 for married couples.

The 24% tax bracket will now rest at $95,375 for individuals and $190,750 for couples filing jointly in 2023.

The 22% tax bracket will start at $44,725 and above for individuals and $89,450 for married couples filing jointly.

The 12% tax bracket will apply to income over $11,000 for individuals and for couples making more than $22,000 — while the lowest bracket, with a 10% tax rate, will apply to income below these figures.

Take Our Poll: Do You Believe in Quiet Quitting?
More: States Whose Economies Are Failing vs. States Whose Economies Are Thriving

The IRS has taken these measures to help offset price increases related to inflation as well as weakened American salaries that have not kept pace with the cost of living. As The New York Times reported, citing data from the U.S. Department of Labor, “Inflation-adjusted weekly earnings declined nearly 4%” year-over-year last month.

More From GOBankingRates

  • 8 Undiscovered, Cheap and Beautiful Cities To Retire In

  • Get Ready for Retirement Now With Expert Tips for Every Stage of Life

  • Should You Still Buy a Home in Today’s Market?

  • 10 Things to Do Now If Your Credit Score Is Under 700

This article originally appeared on GOBankingRates.com: The IRS Is Letting You Keep More Money in 2023, Increasing Standard Deductions for Inflation

Source: Read Full Article