This May Be Good News If You Didn’t Get A Raise This Year.
That will be welcome news for many people whose wages have not kept up with the highest price increases in four decades this year.
The announcement of the tax bracket changes comes just a week after the Social Security Administration revealed the largest Inflation adjustment in a generation for fixed-income beneficiaries.
In normal times, tax brackets move in lockstep with inflation, which means that the amount of tax you pay on your income gradually shifts. However, the persistently high inflation that consumers have been experiencing this year is out of the ordinary, so tax brackets are being raised to compensate. The good news is that if your wages do not rise sufficiently, you will most likely fall into a lower tax bracket in 2023.
The standard deduction for married couples filing jointly increases to $27,700 for the 2023 tax year, up $1,800 from the previous year. The standard deduction for single taxpayers and married individuals filing separately is increased by $900 to $13,850, and the standard deduction for heads of households is increased by $1,400 to $20,800.
Meanwhile, in 2023, the 12% tax bracket will be available to married couples filing jointly with incomes exceeding $22,000 and individuals earning more than $11,000. The 22% tax bracket will apply to married couples filing jointly earning more than $89,450 and individuals earning more than $44,725. This compares to this year’s thresholds of $83,550 and $41,775 for the 22% rate.
Married couples filing jointly with incomes of more than $190,750, or individuals with incomes of more than $95,375, will be subject to the 24% rate.
Married couples filing jointly with incomes over $364,200 or individuals with incomes over $182,100 will pay the 32% rate.
Furthermore, married couples filing jointly with incomes exceeding $462,500 or individuals earning more than $231,250 will be subject to the 35% rate.
The highest rate, 37%, will be applied to married couples filing jointly with incomes of more than $693,750, or individuals earning more than $578,125.
The earned income tax credit, which benefits low-income workers, will increase by about 7%, rising from $6,935 in 2022 to $7,430 in 2023. And, for the 2022 tax year, the alternative minimum tax exemption amount will be $81,200 ($126,500 for married couples filing jointly), up from $75,900 for individuals and $118,100 for married couples filing jointly.
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