U.S. News
Americans can pay less in 2023 taxes after IRS inflation adjustments
WHAT YOU NEED TO KNOW:
- Tax filers can pay smaller tax bills in 2023 due to soaring inflation, according to the IRS.
- The IRS on Tuesday released its inflation-adjusted tax brackets for the 2023 tax filing season.
- The income thresholds for tax brackets are among the provision changes “of greatest interest to most taxpayers,” the company said.
The Internal Revenue Service on Tuesday released inflation-adjusted tax brackets for 2023, marking a boost on Americans’ paychecks next year.
This move is a welcome change as the cost of living adjustments and the recent action for Social Security payments are critical in sky-high inflation.
The IRS adjustments apply to the 2023 tax year, for which tax returns will generally be filed in 2024. According to The Hill, the adjustments will ward off “bracket creep,” when wage hikes aimed at accounting for a higher cost of living place taxpayers into higher tax brackets.
The standard deduction for married couples filing jointly in 2023 is $27,700, up $1,800 from the prior year.
For single taxpayers and married taxpayers filing separately, the standard deduction rises rose to $13,850, up $900.
Tax rates remain the same but the income limits for each tax rate are different, meaning the top tax rate might have gone down.
For example, if an individual had an annual income of $90,000 in 2022, the top tax rate was 32%. In 2023, it would be 24%.
The IRS adjusts tax brackets every year to ward off “bracket creep.”
If the IRS tax brackets were still set at a 1980 level, then an individual with a salary of $34,000 a year would face a 49% tax rate. That would be considered extremely regressive in 2022.
Congress codified the annual inflation adjustments as part of the Reagan tax cuts in 1981; which became effective in 1985. Brackets weren’t adjusted before 1981, even there was a period when inflation was high.
Source: The Hill
Tom
October 19, 2022 at 6:47 pm
How a 10% flat rate? All tax revenues go to the Federal Government and the Federal Government, in turn, sends half of that back to the States to distribute to their local governments as they see fit. For example; if the State of Mississippi sends in $100M in revenue, then the Fed returns $50 M to Mississippi. If Texas sends in $500M in revenue, then the Fed will send $250M back to Texas. The States then will distribute those finds to their State, County, and City governments as they choose. This includes ALL other taxes (property, gasoline, sales, and so on). Food for thought: God only asks for 10% and He runs the entire universe.
Fred
October 20, 2022 at 11:08 am
Oh man, you’re making way too much sense! Flat tax would get rid of 90% of the IRS, they can’t have that! They want to add 87,000 new agents to go after middle income and small business owners… I’ve been a flat-taxer since I was old enough to pay taxes and do basic math.