The IRS adjusted its income tax brackets for 2023

Oct 23, 2022 | IRS - Internal Revenue Service, US Tax Return 1040 / 1040NR | 0 comments

If your income doesn’t rise in 2023, some tax relief is on the way You might owe less in taxes next year.

As part of its annual adjustments based on inflation, the IRS increased the income thresholds for its tax brackets by thousands of dollars. These changes are effective for the 2023 tax year.
The U.S. has a progressive, or graduated, tax system, so income isn’t taxed a flat rate. Instead, it’s taxed at differing rates — 10%, 12%, 22%, 24%, 32%, 35% and 37% — as it rises past certain thresholds, or tax brackets.

For the 2022 tax year, you’ll only be taxed 10% of your income up to a maximum of $10,275, after which it would be taxed at 12% for a maximum of $41,775, and so on.

However, since the income floors for tax brackets have increased for 2023, you will pay less in taxes if your total income doesn’t change between 2022 and 2023.

Here’s a simplified example: If your taxable income is $75,000 in 2022, you’ll owe $12,117 in taxes. But if it stays at $75,000 in 2023, you’ll only owe $11,807.50 — a difference of over $300.

Here’s a look at the updated tax bracket floors, compared to the 2022 tax year, for a single tax filer:

Tax bracket20222023Difference

Here’s a look at the tax bracket floors, compared to the 2022 tax year, for those married filing jointly:

Tax bracket20222023Difference

These adjustments are made each year to avoid “bracket creep” — an increase in taxable income even when income has lost its purchasing power due to inflation.

The IRS also increased the standard deduction for single filers by $900, for a total of $13,850 in 2023. For joint filers, the amount increases by $1,800, for a total standard deduction of $27,700. The standard deduction — taken by about 90% of all U.S. tax filers — is a flat amount that reduces your taxable income for a given year.

Additionally, the IRS increased the earned income tax credit, the alternative minimum tax exemption, and the amount workers can deduct for contributions to health flexible spending accounts. More details can be found on an IRS webpage about the changes.

If you have any further questions or doubts , please do not hesitate to contact us directly: US Tax Consultants – Phone:+34 915 194 392

CNBC – Make it Oct 20, 2022


Submit a Comment

Your email address will not be published. Required fields are marked *