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- Published: October 24, 2022
- 3 min read time
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To help prevent taxpayers from being taxed in higher income brackets, over 60 tax provisions received annual inflation adjustments for 2023. The adjustments were made to prevent “bracket creep,” which is caused when inflation pushes you into a new tax bracket, rather than an income increase. According to CBS News, this past year’s high inflation rate has made significant changes to IRS brackets compared to previous years.
The IRS announced the new tax brackets and deductions on October 18, 2022. The 2023 tax adjustments will typically apply to tax returns in 2024.
2023 IRS Inflation Adjustments
The IRS highlighted several changes that would positively impact taxpayers.
With marginal tax brackets, the top tax rate is 37% in 2023 for individual taxpayers with incomes greater than $578,125. For married couples filing jointly, the income would have to exceed $693,750. The lowest rate is 10%, which applies to single individuals with an income of $11,000 of less — or married couples filing jointly with an income of $22,000.
Refer to the chart below to confirm your new tax rate based on your salary and whether you’re filing individually or jointly.
|Income for Single Taxpayers||Income for Married Couples Filing Jointly||Tax Rate|
|$578,125 or more||$693,750 or more||37%|
|$231,250 – $578,124||$462,500 – $693,749||35%|
|$182,100 – $231,249||$364,200 – $462,499||32%|
|$95,375 – $182,099||$190,750 – $364,199||24%|
|$44,725 – $95,374||$89,450 – $190,749||22%|
|$11,000 – $44,724||$22,000 – $89,449||12%|
|$0 – $10,999||$0 – 21,999||10%|
Your standard deductions also vary depending on your income and filing status. This year, there was a significant increase compared to past years. For example, the standard deduction for the head of households increased by $600 in 2022. In 2023, the standard deduction increased by $1,400.
2023 Standard Deductions
Adjustments to Exemptions, Exclusions and Credits
Alongside the new tax brackets and standard deductions, the adjustments also apply to exemptions, exclusions and credits.
How Might These Inflation Adjustments Impact Taxpayers?
The 2023 inflation adjustments will benefit all taxpayers, with a focus on those who haven’t received a pay increase in the last year. You could receive tax relief by being placed into a lower tax bracket.
“Such inflation adjustments definitely highlight those lower tax rates, ultimately benefiting the middle class who pay most of the tax burdens.” Lars Koch, finance specialist at Kredit Finance told Annuity.org. “This move was oriented to seeing the rising prices of staples, energy and consumables lately.”
2 Cited Research Articles
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- Picchi, A. (2022, October 20). The IRS Just Changed Its Tax Brackets. That Could Lower Your Taxes. Retrieved from https://www.cbsnews.com/news/tax-bracket-irs-inflation-adjustment-new-tax-brackets-for-2023/
- Internal Revenue Service. (2022, October 18). IRS Provides Tax Inflation Adjustments for Tax Year 2023. Retrieved from https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2023