IRS Releases New Federal Tax Brackets for 2023: What It Means For Your Wallet

by Gus Gonzalez
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Updated on November 1, 2022
Taxes
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Last Tuesday, the IRS announced its new income tax brackets for 2023. While the tax rates have stayed the same, many tax provisions will increase by roughly 7% to keep up with the high inflation we’ve seen recently. These new rates will go into effect when you file your taxes next year.

Since we’re dealing with the highest level of inflation rate in decades, the adjustment will hopefully help everyone save on taxes and offset the higher cost of living. Let’s look at next year’s tax brackets and what they can do for your wallet!

What Do Next Year’s Tax Brackets Look Like?

Single Filers

  • 10% for incomes up to $11,000
  • 12% for incomes between $11,001 and up to $44,725
  • 22% for incomes between $44,726 and up to $95,375
  • 24% for incomes between $95,376 and up to $182,100
  • 32% for incomes between $182,101 and up to $231,250
  • 35% for incomes between $231,251 and up to $578,125
  • 37% for incomes over $578,126

Married Couples Filing Separately

  • 10% for incomes up to $11,000
  • 12% for incomes between $11,001 and up to $44,725
  • 22% for incomes between $44,276 and up to $95,375
  • 24% for incomes between $94,376 and up to $182,100
  • 32% for incomes between $182,101 and up to $231,250
  • 35% for incomes between $231,251 and up to $346,875
  • 37% for incomes over $346,876

Married Couples Filing Jointly

  • 10% for incomes up to $22,000
  • 12% for incomes between $22,001 and up to $89,450
  • 22% for incomes between $89,451 and up to $190,750
  • 24% for incomes between $190,751 and up to $364,200
  • 32% for incomes between $364,201 and up to $462,500
  • 35% for incomes between $462,501 and up to $693,750
  • 37% for incomes over $693,751

Head Of Households

  • 10% for incomes up to $11,000
  • 12% for incomes between $11,001 and up to $44,725
  • 22% for incomes between $44,726 and up to$95,375
  • 24% for incomes between $95,376 and up to $182,100
  • 32% for incomes between $182,101 and up to $231,250
  • 35% for incomes between $231,251 and up to $578,125
  • 37% for incomes over $578,126

What Other Tax Reforms Are There?

Besides paying fewer taxes, most taxpayers benefit from higher tax credits and other reforms. Here are some of the main ones:

Higher Standard Deductions

Every taxpayer has the right to a standard deduction or itemized tax rate to lower their overall burden every tax season. Like the income tax bracket increase, standard deductions will go up substantially. Single taxpayers and married couples filing separately will see a $900 increase, heads of household will see a $1,400 increase, and a married couple filing together will see an increase of $1,800.

Capital Gains Tax

If you have an asset that has gained in value, such as crypto or real estate, you’re responsible for capital gains taxes on the profit you’ve earned. While short-term capital gains tax is based on your income, long-term capital gains are taxed at 0%, 15%, or 20% when you sell your investments. Like income taxes, there will be an income bracket increase that applies to long term capital gains as well.

Additional IRS Tax Provisions

The IRS has also boosted income brackets for dozens of other tax credits and provisions, including:

  • Earned income tax credits
  • Annual exclusion for gifts
  • Child tax credits
  • Alternative Minimum Tax (AMT) Exemptions
  • Qualified Business Income Deductions

Whether you’re a small business owner or a family, next year’s tax reforms will help make everyone’s tax burden slightly lower, which means more money in your wallet.

The Bottom Line

With stubborn inflation and a possible recession around the corner, it’s understandable that you’re looking for ways to save some money. Thankfully, these newly adjusted tax brackets will give struggling families much-needed relief. Besides the income tax adjustment, there are many credits almost everyone can take advantage of this tax season.

The last day to file your taxes next year is April 18th, so submit everything early to avoid penalties!

Read More: IRS Raising Retirement Account Contribution Limits for 2023: What It Means For Your Financial Future