The standard deduction and individual income tax brackets for 2023 will both be adjusted by the IRS to take the effects of inflation into consideration.
For some individuals, the adjustments may result in tax savings in the upcoming year. The increased thresholds are intended to prevent “bracket creep,” which can place employees who got annual cost-of-living pay increases into higher tax brackets even while their quality of living hasn’t changed. People who don’t itemize their taxes use the standard deduction, which lowers the amount of income that is subject to tax. Each tax filing status, such as single filers or married couples, will see an increase in tax brackets of around 7%, according to the IRS. For single taxpayers with earnings over $578,125 and married couples with incomes over $693,750, the top marginal rate—the highest tax rate based on income—remains at 37%. People who don’t itemize their taxes use the standard deduction, which lowers the amount of income that is subject to tax.
- The standard deduction for married couples filing jointly will increase to $27,700 from $25,900 in the current tax year. That represents an increase of $1,800 or 7%.
- The standard deduction for single taxpayers and married couples filing separately will increase to $13,850 in 2023 from $12,950 currently. That represents a growth of roughly 6.9%.
- The standard deduction for household heads will increase to $20,800 in 2023 from $19,400 this year. That is a 7.2% gain.