The IRS released inflation-adjusted marginal rates and brackets for 2023 on Tuesday, and many workers will see higher take-home pay in the new year as less tax is withheld from their paychecks.
Additionally, the agency released the standard deduction for next year. It is increasing by $900 to $13,850 for single taxpayers, and by $1,800 for married couples, to $27,700. For heads of household, the 2023 standard deduction will be $20,800. That's an increase of $1,400.
Here are the marginal rates for tax year 2023, depending on your tax status.
Single filers– 10%: income of $11,000 or less– 12%: income between $11,001 and $44,725– 22%: income between $44,726 and $95,375– 24%: income between $95,376 and $182,100– 32%: income between $182,101 and $231,250– 35% income between $231,251 and $578,125– 37%: income greater than $578,125
Married filing jointly– 10%: income of $22,000 or less– 12%: income between $22,001 and $89,450– 22%: income between $89,451 and $190,750– 24%: income between $190,751 and $364,200– 32%: income between $364,201 and $462,500– 35% income between $462,501 and $693,750– 37%: income greater than $693,750
Additionally, the maximum Earned Income Tax Credit for 2023 is $7,430 for those who have three or more qualifying children. The maximum contribution to a health care flexible spending account is also increasing, from $2,850 to $3,050.
Wealthy Americans will also be able to exclude significantly more assets from the estate tax in 2023. Individuals will be able to transfer up to $12.92 million tax-free to their descendants, up from just over $12 million in 2022. A married couple can pass on double that. And the annual exclusion for gifts increases to $17,000.
Each year the IRS adjusts dozens of important tax provisions based on a formula set by Congress. Given soaring inflation rates over the past year, the adjustments for 2023 are more significant than in past years.
Assuming all else stays the same, this means that workers will see higher take-home pay starting in January.
The agency has yet to announce the maximum contribution amounts to 401(k) plans or the income thresholds for retirement accounts for 2023. Last week, the Social Security Administration announced a decades-high cost-of-living-adjustment, also due to inflation.
This story was originally featured on Fortune.com
More from Fortune:
The economist who just won the Nobel Prize warns the Fed will cause ‘all kinds of trouble’
Microsoft’s remote-work-friendly CEO puts his finger on the big problem with working from home
Gen Z activists who dumped 2 cans of tomato soup on Van Gogh’s ‘Sunflowers’ plead not guilty in court
South Korea stands to lose billions from making K-pop superstars BTS do military serviceClick Here To Get Funded!