As inflation continues to rise, the IRS published this week higher Federal income tax brackets as well as higher standard deductions for 2023. Some key takeaways from the announcement are:
As before mentioned, the IRS has released higher federal tax brackets for 2023 to adjust for inflation.
The standard deduction is increasing to $27,700 (from $25,900 in 2022) for married couples filing together and $13,850 (from $12,950 in 2022) for single taxpayers.
There are also changes to the alternative minimum tax, estate tax exemption, earned income tax credit and flexible spending account limits, among others.
The lifetime estate and gift tax exemption (also known as the unified credit), will jump to $12.92 million in 2023, up from $12.06 million in 2022.
The rise in levels were approximately 7% higher across the board from 2022 levels. Considering the Consumer Price Index (CPI) has been approximately 8-10% so far in 2022, a 7% increase is somewhat disappointing. However, as of September 2022, core inflation is 6.6% which would suggest that a 7% adjustment is fair.
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