2023 IRS Inflation-Adjusted Numbers

The IRS just released “inflation-adjusted items” 📈 for 2023.

What does this mean and how could it impact you?

Here’s the scoop. 🍨

Numerous federal tax brackets, credits, deductions, etc. update each year to reflect annual increases in inflation. As costs rise, so do certain tax benefits.

Examples include federal income tax brackets, the standard deduction, and the estate/lifetime gift tax exemption.

Not ALL tax credits, deductions, etc. are tied to inflation. For example, the child tax credit amount of $2,000 doesn’t change, nor does its income threshold.

Given recent significant inflation, next year’s numbers take a big jump over this year’s.

Here are a few ways this could impact you in 2023:

👇

✅ The standard deduction rises from $25,900 in 2022 to $27,700 in 2023 if you’re filing a joint return. It increases from $12,950 in 2022 to $13,850 in 2023 if you file single. Depending on your tax bracket and filing status, this could be several hundred dollars of savings if you don’t itemize your personal deductions.

✅ The 0% long-term capital gains tax bracket for 2023 will be $89,250 married, $44,625 single. This is up from $83,350 married, $41,675 single for 2022. Especially for those in retirement years, this gives you more room to potentially realize LT gains without additional federal tax.

✅Ordinary income marginal tax brackets are moving up across the board. “Marginal” means that once your income increases to a certain level, income earned OVER that level is subject to a higher tax rate. It does NOT mean that ALL your income is now subject to that higher tax rate. If you have significant levels of income and control over its timing, pushing some income from this year into the next could look even more appealing than usual.

Reminder - these are changes to 2023 numbers for tax returns filed in 2024. They may impact your 2022 tax planning now, but you won’t see the numbers on a tax return until 2024.