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If your income doesn\u2019t rise in 2023, some tax relief is on the way You might owe less in taxes next year.<\/p>\nIf your income doesn\u2019t rise in 2023, some tax relief is on the way You might owe less in taxes next year.<\/p>\n
As part of its annual adjustments based on inflation, the IRS\u00a0increased the income thresholds for its tax brackets<\/a>\u00a0by thousands of dollars. These changes are effective for the 2023 tax year. For the 2022 tax year, you\u2019ll only be taxed 10% of your income up to a maximum of $10,275, after which it would be taxed at 12% for a maximum of $41,775, and so on.<\/p>\n However, since the income floors for tax brackets have increased for 2023, you will pay less in taxes if your total income doesn\u2019t change between 2022 and 2023.<\/p>\n Here\u2019s a simplified example: If your\u00a0taxable income<\/a>\u00a0is $75,000 in 2022, you\u2019ll owe $12,117 in taxes. But if it stays at $75,000 in 2023, you\u2019ll only owe $11,807.50 \u2014 a difference of over $300.<\/p>\n Here\u2019s a look at the updated tax bracket floors, compared to the 2022 tax year, for a single tax filer<\/strong>:<\/p>\n Here\u2019s a look at the tax bracket floors, compared to the 2022 tax year, for those married filing jointly<\/strong>:<\/p>\n These adjustments are made each year to avoid \u201cbracket creep\u201d \u2014 an increase in taxable income even when income has lost its purchasing power due to inflation.<\/p>\n The IRS also increased the standard deduction for single filers by $900, for a total of $13,850 in 2023. For joint filers, the amount increases by $1,800, for a total standard deduction of $27,700. The standard deduction \u2014\u00a0taken by about 90% of all U.S. tax filers<\/a>\u00a0\u2014 is a flat amount that reduces your taxable income for a given year.<\/p>\n Additionally, the IRS increased the earned income tax credit, the alternative minimum tax exemption, and the amount workers can deduct for contributions to health flexible spending accounts. More details can be found on\u00a0an IRS webpage about the changes<\/a>.<\/p>\n
\nThe U.S. has a progressive, or graduated, tax system, so income isn\u2019t taxed a flat rate. Instead, it\u2019s taxed at differing rates \u2014 10%, 12%, 22%, 24%, 32%, 35% and 37% \u2014 as it rises past certain thresholds, or tax brackets.<\/p>\n\n\n
\n Tax bracket<\/td>\n 2022<\/td>\n 2023<\/td>\n Difference<\/td>\n<\/tr>\n \n 10%<\/td>\n 0<\/td>\n 0<\/td>\n 0<\/td>\n<\/tr>\n \n 12%<\/td>\n $10,276<\/td>\n $11,001<\/td>\n $725<\/td>\n<\/tr>\n \n 22%<\/td>\n $41,776<\/td>\n $44,726<\/td>\n $2,950<\/td>\n<\/tr>\n \n 24%<\/td>\n $89,076<\/td>\n $95,376<\/td>\n $6,300<\/td>\n<\/tr>\n \n 32%<\/td>\n $170,051<\/td>\n $182,101<\/td>\n $12,050<\/td>\n<\/tr>\n \n 35%<\/td>\n $215,951<\/td>\n $231,251<\/td>\n $15,300<\/td>\n<\/tr>\n \n 37%<\/td>\n $539,901<\/td>\n $578,126<\/td>\n $38,225<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n \n\n
\n \nTax bracket<\/td>\n 2022<\/td>\n 2023<\/td>\n Difference<\/td>\n<\/tr>\n<\/thead>\n \n 10%<\/td>\n $0<\/td>\n $0<\/td>\n $0<\/td>\n<\/tr>\n \n 12%<\/td>\n $20,551<\/td>\n $22,001<\/td>\n $1,450<\/td>\n<\/tr>\n \n 22%<\/td>\n $83,551<\/td>\n $89,451<\/td>\n $5,900<\/td>\n<\/tr>\n \n 24%<\/td>\n $178,151<\/td>\n $190,751<\/td>\n $12,600<\/td>\n<\/tr>\n \n 32%<\/td>\n $340,101<\/td>\n $364,201<\/td>\n $24,100<\/td>\n<\/tr>\n \n 35%<\/td>\n $431,901<\/td>\n $462,501<\/td>\n $30,600<\/td>\n<\/tr>\n \n 37%<\/td>\n $647,851<\/td>\n $693,751<\/td>\n $45,900<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n