Inflation has caused the tax brackets in America to change.
For many people, whose earnings haven’t been keeping up with this year’s greatest price hikes in four decades, that will be pleasant news.
A week after the Social Security Administration reported the greatest inflation adjustment for recipients on fixed incomes in a generation, the tax bracket changes were announced.
Inflation-adjusted tax brackets mean that, in normal times, the amount of tax you pay on your income changes gradually. The tax bands are rising to make up for the abnormally high inflation that consumers have been experiencing this year, though. The good news is that you might move into a lower tax bracket in 2023 if your wages haven’t increased enough.
CLICK HERE TO TRANSLAT THAT IN DOLLARS
For married couples filing jointly in 2023, the standard deduction climbs to $27,700, an increase of $1,800 over the previous year. The standard deduction will increase by $900 for single filers and married people filing separately to $13,850, and by $1,400 for heads of households to $20,800.
In contrast, married couples filing jointly with earnings over $22,000 and individuals with incomes over $11,000 will fall under the 12% tax bracket in 2023. Married couples filing jointly with earnings exceeding $89,450 and individuals with incomes over $44,725 will be subject to the 22% tax bracket. That contrasts with the respective criteria for the 22% rate this year of $83,550 and $41,775 respectively.
Married couples filing jointly with incomes over $190,750 or individuals with incomes over $95,375 will be subject to the 24% rate.
Married couples filing jointly with incomes exceeding $364,200 or individuals with incomes over $182,100 will pay the 32% rate.
Additionally, married couples filing jointly with incomes over $462,500 or individuals making more than $231,250 will be subject to the 35% rate.
Married couples filing jointly who earn more than $693,750 or individuals earning more than $578,125 will be subject to the highest rate, which is 37%.
The lower-income worker-beneficial earned income tax credit will increase by around 7%, from $6,935 for the 2022 tax year to $7,430 in 2023. The AMT exemption amount will rise from $75,900 for individuals and $118,100 for married couples filing jointly for the 2022 tax year to $81,200 ($126,500 for married couples filing jointly) for the following tax year.