2023 Federal Tax Changes: Higher Brackets, Increased Standard Deduction, and Raised Earned Income Tax Credit
Federal income tax brackets will increase by roughly 7%, allowing taxpayers to shield more of their hard-earned income from taxation. For example, single taxpayers earning $44,726 to $95,375 will pay $5,147 plus 22% of the amount over $44,725. Married taxpayers filing jointly making $89,451 to $190,750 will pay $10,294 plus 22% of the amount over $89,450. Outside those brackets? You can find your 2023 tax bracket information here.
The standard deduction is increasing from $25,900 in 2022 to $27,700 for married couples filing jointly and from $12,950 to $13,850 for single taxpayers.
The earned income tax credit amount will jump to $7,430 for qualifying taxpayers with three or more children, up from $6,935 for tax year 2022.
Flexible Spending Account
The new IRS limit for FSA contributions for 2023 is $3,050, an increase of 7% from 2022’s threshold of $2,850.
Taxpayers will be able to give up to $17,000 in gifts in 2023 without paying taxes, up from $16,000 in 2022.
The IRS will exempt up to $12.92 million from the estate tax, up from $12.06 million for people who died in 2022 — another increase of roughly 7%.
The tax changes come days after the government announced that millions of Social Security recipients will get an 8.7% boost in their benefits in 2023 — an average of $140 per month.
Reminder – 2023 tax year
Keep in mind that these changes are for the 2023 tax year and will have no impact on the taxes you file next March. That said, now is the perfect time to begin considering tax strategy as the 2023 tax year approaches.