Tax brackets and standard deductions are changing for U.S. taxpayers in 2023. Adjustments are being made in response to inflation and average about 7% over 2022 rates, allowing for a slight tax reduction if your income remains the same, or a bit of room for a raise before a tax increase kicks in.
Adjustments take effect in the 2023 tax year, so these changes won’t apply until you do your taxes in 2024. To get a preview, here’s how the IRS is adjusting income tax brackets and standard deductions for the 2023 tax year.
Tax Brackets for 2023, Single Filers
Tax brackets apply the lowest tax rates to lower levels of income and progressively higher rates as your income increases. For 2023, the first $11,000 you earn as a single taxpayer is taxed at 10%, the next $33,724 is taxed at 12%, and so on.
| 2023 Tax Brackets, Single Filers | ||
|---|---|---|
| Rate | Tax Bracket | Taxes Owed |
| 10% | $0 – $11,000 | 10% of taxable income |
| 12% | $11,001 – $44,725 | $1,100 + 12% of amount over $11,000 |
| 22% | $44,726 – $95,375 | $5,147 + 22% of amount over $44,725 |
| 24% | $95,376 – $182,100 | $16,290 + 24% of amount over $95,376 |
| 32% | $182,101 – $231,250 | $37,104 + 32% of amount over $182,100 |
| 35% | $231,251 – $578,125 | $52,832 + 35% of amount over $231,250 |
| 37% | $578,126 or more | $174,238 + 37% of amount over $578,125 |
Source: IRS
To estimate the amount of tax you’ll owe, find the bracket that contains your projected taxable income (adjusted gross income minus your standard deduction for 2023, shown below) and do the calculation shown in the right-hand column.
Example: If your 2023 taxable income is $44,000, the first $11,000 of your income is taxed at 10% ($1,100) with the remaining $33,000 taxed at 12%. Therefore, you will owe $1,100 + 12% of $33,000, or $5,060. Your income places you in the 12% tax bracket.
For reference, tax on the same $44,000 in income in 2022 would be $5,298, and would place you in the 22% tax bracket. The tax savings in 2023 is marginal but significant, and certainly less tax is better than more.
Tax Brackets for 2023, Married Filing Jointly
Married couples filing jointly will see proportional adjustments to their tax brackets, with the top bracket starting at $693,751 versus $647,851 in 2022.
| 2023 Tax Brackets, Married Filing Jointly | ||
|---|---|---|
| Rate | Tax Bracket | Taxes Owed |
| 10% | $0 – $22,000 | 10% of taxable income |
| 12% | $22,001 – $89,450 | $2,200 + 12% of amount over $22,000 |
| 22% | $89,451 – $190,750 | $10,294 + 22% of amount over $89,450 |
| 24% | $190,751 – $364,200 | $32,580 + 24% of amount over $190,750 |
| 32% | $364,201 – $462,500 | $74,208 + 32% of amount over $364,200 |
| 35% | $462,501 – $693,750 | $105,664 + 35% of amount over $462,500 |
| 37% | $693,751 or more | $186,602 + 37% of amount over $693,750 |
Source: IRS
What Are the Standard Deductions for 2023?
In addition to tax bracket adjustments, standard deductions are changing in 2023. Here again, the amounts have been adjusted for inflation by roughly 7%. If you take the standard deduction instead of itemizing, here are the standard deductions for 2023 and their 2022 counterparts.
| Standard Deductions for 2023 | |||||
|---|---|---|---|---|---|
| Single and Married Filing Separately | Head of Household | Married Filing Jointly | |||
| 2022 | 2023 | 2022 | 2023 | 2022 | 2023 |
| 12,950 | 13,850 | 19,400 | 20,800 | 25,900 | 27,700 |
Source: IRS
The Bottom Line
Adjustments for inflation help ensure that IRS marginal tax rates and standard deductions reflect the financial realities of everyday Americans more accurately. Because inflation has packed a bigger punch recently than in years past, your personal finances may benefit from an adjustment as well. Consider revisiting your monthly budget and checking up on your credit report and score to make sure you’re on track to meet your financial goals, maintain your financial health and make good use of any tax savings you’ll see as a result of these IRS changes.
The post What Are the New Tax Brackets for 2023? appeared first on Experian’s Official Credit Advice Blog.
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