The IRS this week announced higher federal income tax brackets and standard deductions for 2023 amid skyrocketing inflation. For the tax year 2023, the agency raised the income requirements for each group.
According to inflation adjustments issued by the agency on Tuesday, individual income over $578,125 and married couples’ income over $693,750 would be subject to the 37% top marginal tax rate starting in 2023. These limits will increase 7% from 2022.
The standard deduction will increase by nearly 7% to $27,700 for married couples and $13,850 for single people.
The criteria for married couples in each of the six tax categories below the top 37% bracket are all double then those of individual taxpayers. The rates apply to taxable income, or income that has been reduced by deductions. The 10% tax bracket increases to $11,000 for people in 2023, the 12% bracket increases to $44,725; the 22% bracket increases to $95,375; the 24% bracket increases to $182,100; the 32% bracket increases to $231,250; and the 35% bracket increases to the top-bracket threshold.
The Social Security Administration published the inflation adjustment for the Social Security payroll tax for 2023, which will be levied on incomes up to $160,200 rather than $147,000 for 2022.
When an individual’s income reaches $200,000 and a married couple’s income reaches $400,000, the maximum child tax credit, which is still $2,000, starts to phase down. A maximum of $3,000 may be deducted from ordinary income in the form of capital losses. State and local tax deductions are still only allowed up to $10,000.