The income ranges, adjusted annually for inflation, determine which tax rates apply to you
Even though we’re still in the 2022 tax year, and you filed your 2021 tax returns back in April, you’re probably thinking to yourself, “Gosh! I wonder what the tax brackets are for the 2023 tax year?”
We’ve got you covered — and there’s actually some good news, thanks to inflation. The Internal Revenue Service (IRS) adjusts tax brackets for inflation each year, and because inflation is so high, it’s possible you could fall to a lower bracket for the income you earn in 2023. Your standard deduction — the amount you can use as a deduction without itemizing — will also be higher.
If you start now, you can make plans to reduce your 2023 tax bill. Knowing the tax brackets for 2023 can help you implement smart tax strategies, like adjusting your income tax withholding, so you don’t get caught with a big tax bill next year.
How the brackets work
In the U.S. tax system, income tax rates are graduated, so you pay different rates on different amounts of taxable income. There are seven of these tax brackets in all. The more you make, the more you pay.
Importantly, your highest tax bracket doesn’t reflect how much you pay in federal income taxes. If you’re a single filer in the 22 percent tax bracket for 2023, you won’t pay 22 percent on all your taxable income. You will pay 10 percent on taxable income up to $11,000, 12 percent on the amount from $11,000 to $44,725, and 22 percent above that (up to $95,375).
Tax brackets for income earned in 2022
- 37% for incomes over $539,900 ($647,850 for married couples filing jointly)
- 35% for incomes over $215,950 ($431,900 for married couples filing jointly)
- 32% for incomes over $170,050 ($340,100 for married couples filing jointly)
- 24% for incomes over $89,075 ($178,150 for married couples filing jointly)
- 22% for incomes over $41,775 ($83,550 for married couples filing jointly)
- 12% for incomes over $10,275 ($20,550 for married couples filing jointly)
- 10% for incomes of $10,275 or less ($20,550 for married couples filing jointly
Married filing separately pay at same rate as unmarried. Source: Internal Revenue Service
Tax brackets for income earned in 2023
- 37% for incomes over $578,125 ($693,750 for married couples filing jointly)
- 35% for incomes over $231,250 ($462,500 for married couples filing jointly)
- 32% for incomes over $182,100 ($364,200 for married couples filing jointly)
- 24% for incomes over $95,375 ($190,750 for married couples filing jointly)
- 22% for incomes over $44,725 ($89,450 for married couples filing jointly)
- 12% for incomes over $11,000 ($22,000 for married couples filing jointly)
- 10% for incomes of $11,000 or less ($22,000 for married couples filing jointly)
Married filing separately pay at same rate as unmarried. Source: Internal Revenue Service
In addition, the standard deduction will rise to $13,850 for single filers for the 2023 tax year, from $12,950 the previous year. The standard deduction for couples filing jointly will rise to $27,700 in 2023, from $25,900 in the 2022 tax year. Single filers age 65 and older who are not a surviving spouse can increase the standard deduction by $1,850. Each joint filer 65 and over can increase the standard deduction by $1,500 apiece, for a total of $3,000 if both joint filers are 65-plus. You can also itemize individual tax deductions, for things like charity donations, but they need to add up to more than the standard deduction to make itemizing worthwhile.
The IRS uses the chained consumer price index (CPI) to measure inflation, as mandated by the 2017 tax reform. Like the more well-known consumer price index, the chained CPI measures price changes in about 80,000 items. The chained CPI takes into account the fact that when prices of some items rise, consumers often substitute other items. If the price of beef rises, for example, people switch to chicken.
If you’re not an economist, the main difference between the two measures is that, over time, the chained CPI rises at a slower pace than the traditional CPI — which, to be precise, is called the Consumer Price Index for All Urban Consumers, or CPI-U. From September 2012 through September 2022, the CPI-U rose by 28.3 percent and the chained CPI by only 24.8 percent, a difference of 3.5 percentage points.
If you paid a big tax bill in 2022, you should talk with a tax adviser about how to reduce your bill in 2023. It’s probably easier to have more money withheld from each paycheck than to face a big tax bill next year. A good first step is to look at how much tax you get taken from your paycheck. The IRS has a free withholding estimator that can tell you how much you should have taken out.
https://www.aarp.org/money/taxes/info-2022/income-tax-brackets-2023.html