IRS Inflation Adjustments for 2023
On Tuesday October 18, 2022, the IRS announced their annual adjustments to the standard deduction and tax brackets for the 2023 tax year. You will not see or notice the impacts of the adjustments on your 2022 tax filing as the changes made will not go into effect until the 2023 tax year (tax return filed in 2024), understanding these changes is essential and will help long term in your tax strategy.
Changes you can look for and expect are as follows:
· Standard Deduction Changes 2023
$13,850 for single filers (an increase of $900)
$20,800 for head of household filers (an increase of $1,400)
$27,700 for married couples filing jointly (an increase of $1,800)
· 2023 IRS Marginal Income Tax Bracket (changes)
· Alternative Minimum Tax Rate (AMT)
· $81,300 or $126,500 for joint filers
· Married individuals filing separately will phase in at $63,250
· For estates and trusts, the line is drawn at $28,400
· Earned Income Tax Credit changes
For the 2023 tax year, the EITC tax credit ranges from $600 to $7,430 depending on your income and family size. The complete phaseout income under the tax credit now sits at:
· $17,640 for filers with no children
· $46,560 for filers with one child
· $52,918 for filers with two children
· $56,838 for filers with three or more children
· Capital Gains Tax Rates
For 2023, the IRS tax inflation adjustments on long-term capital gains are:
· Specialty Allowances
The IRS also increased several specialty allowances that may not apply to all circumstances, here are a few:
· The annual exclusion for gifts increases from $16,000 to $17,000
· The foreign earned income exclusion increases from $112,000 to $120,000
· The basic estate tax exclusion for inheritances increases from $12,060,000 to $12,920,000