IRS ups standard deductions, tax brackets due to inflation. Here’s what to know.
WASHINGTON (AP) — Taxpayers will get fatter standard deductions for 2023 and all seven federal income tax bracket levels will be revised upward as the government allows people to shield more of their money from taxation because of persistently high inflation.
For couples who file jointly for tax year 2023, the standard deduction increases to $27,700 up $1,800 from tax year 2022, the IRS announced. Single taxpayers and married people filing separately will see their the standard deduction rise to $13,850, up $900, and for heads of households, the standard deduction will be $20,800, up $1,400.
The adjustments come as inflation accelerated in September, with the Consumer Price Index rising 0.4% last month after just 0.1% in August. Inflation is up 8.2% for the past 12 months.
Some items that were indexed for inflation in the past will remain unchanged, such as the personal exemption, which remains at zero. And the limitation on itemized deductions was eliminated under President Donald Trump.
The government adjusts a variety of benefits and indexes based on inflation.
Last week, the Social Security Administration announced a 8.7% cost of living adjustment increase for benefits recipients beginning in January 2023.
The cost-of living adjustment — the largest in more than 40 years — means the average recipient will receive more than $140 extra a month beginning in January, the Social Security Administration said. The maximum amount of earnings subject to Social Security payroll taxes for 2023 is $160,200, up from $147,000 in 2022.