As many Americans are now beginning to think about filing their 2022 tax return, the Internal Revenue Service (IRS) has made changes to the standard deduction and tax brackets for the 2023 tax year. In many cases, taxpayers will save money.
The IRS makes these changes each October but this year, inflation is producing bigger adjustments. For example, The standard deduction for married couples filing jointly for tax year 2023 rises to $27,700 up $1,800 from the prior year.
Single taxpayers and married individuals filing separately will see a $900 increase, with their standard deduction rising to $13,850 for 2023. For heads of households, the standard deduction will be $20,800 for tax year 2023, up $1,400 from the amount for tax year 2022.
New tax brackets
Some taxpayers may find themselves in a different tax bracket in 2023 as the IRS makes adjustments for inflation. The new tax brackets for the 2023 tax year are:
37% for incomes over $578,125 ($693,750 for married couples filing jointly)
35% for incomes over $231,250 ($462,500 for married couples filing jointly)
32% for incomes over $182,100 ($364,200 for married couples filing jointly)
24% for incomes over $95,375 ($190,750 for married couples filing jointly)
22% for incomes over $44,725 ($89,450 for married couples filing jointly)
12% for incomes over $11,000 ($22,000 for married couples filing jointly)
10% for iincomes less than $11,000 ($22,000 for married couples filing jointly)
The Alternative Minimum Tax (AMT) exemption amount for tax year 2023 is $81,300, up from $75,900 in 2022. It begins to phase out at $578,150.
The new maximum Earned Income Tax Credit amount is $7,430 for qualifying taxpayers who have three or more qualifying children, up from $6,935 for tax year 2022.