Inflation rates are now higher than in the last several decades. The cost of rent, gasoline, and groceries has increased. This is why the IRS has announced inflation adjustments for the 2023 tax year. The adjustments are among the largest ones made in history and will transform individual income tax brackets. The inflation adjustments will also increase vital tax deductions and credits for 2023. These are the taxes that taxpayers will file in 2024.
The most notable increases are around 7 percent for income tax brackets, standard deduction amounts, and the Earned Income Tax Credit for that year. In an isolated announcement, the IRS stated that there would be a record increase in retirement contribution limits in 2023.
The announcement of adjustments occurs yearly. Yet, in a year of high inflation, deciding to increase the standard income and deduction thresholds where tax rates become effective means that some people in every income bracket will save money.
The standard deduction for singles and married couples filing their taxes separately will rise to $13,850 for 2023. This is an increase of $900 from 2022. The standard deduction for married people who wish to file jointly increases by $1,800 from 2021 to $27,700. For heads of households, the standard deduction is expected to be $20,800 for the 2023 tax year.
Some additional IRS changes can be found here.
