America’s high inflation rate will produce a 7% increase in the size of the standard deduction when workers file their taxes on their 2023 income, according to new inflation adjustments from the Internal Revenue Service. It’s also going to pump up tax brackets by 7% as well, according to the annual inflation adjustments the IRS announced Tuesday.
Many tax code provisions — but not all — are indexed for inflation, so the announcements are a recurring event. But when inflation is persistently clinging to four-decade highs, these annual adjustments carry extra significance.
“When inflation is persistently clinging to four-decade highs, these annual adjustments of approximately 7% for the standard deduction carry extra significance.”
Start with the standard deduction, which is what most people use instead of itemizing deductions. The standard deduction for individuals and married people filing separately will be $13,850 for the 2023 tax year. That’s a $900 increase from the $12,950 standard deduction for the upcoming tax season. For married couples filing jointly, the payout climbs to $27,700 for the 2023 tax year. That’s a $1,800 increase from the $25,900 standard deduction set for the upcoming tax year. The increases in the marginal tax rates reflect the same 7% rise. For example, the 22% tax bracket for this year is over $41,775 for single filers and over $83,550 for married couples filing jointly. Next year, the same 22% bracket applies to incomes over $44,725 and over $89,450 for married couples filing jointly.
MarketWatch/IRS
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