Standard deductions and Earned Income Tax Credits have been updated for the coming year.
Changes for the 2023 tax year include an increase in the standard for married couples filing jointly, rising $1,800 from the prior year to $27,700.
Single taxpayers and married individuals who file separately will see their standard deduction go up $900 to $13,850 for 2023. For heads of households, the standard deduction rises $1,400 from tax year 2022 to $20,800.
The IRS has also set marginal tax rates, depending on pay brackets. It’s 12% for individuals with incomes over $11,000 — or $22,000 for married couples who file jointly. It’s 22% for individuals who make more than $44,725, and $89,450 for married couples filing jointly.
It’s 24% for incomes over $95,375, and $190,750 for married couples filing jointly. It’s 32% for those with incomes of more than $182,100, and $364,200 for married couples who file jointly. It’s 35% for incomes over $231,250, and $462,500 for married couples filing jointly.
Single individuals with incomes of $11,000 or less will pay 10%, as well as married couples filing jointly who make $22,000 or less. The top tax rate remains 37% for individual single taxpayers with incomes of more than $578,125 — and married couples filing jointly who make more than $693,750.
The tax year 2023’s maximum Earned Income Tax Credit amount is $7,430 for taxpayers with three or more qualifying children — up from $6,935. The Alternative Minimum Tax exemption amount is $81,300 and begins to phase out at $578,150. It’s $126,500 for married couples filing jointly, and their exemption begins to phase out at $1,156,300.
The limit on employee salary reductions for contributions to health flexible spending arrangements increases to $3,050. Estates of decedents who died in 2023 now have a basic exclusion amount of $12.92 million, up from $12.06 million in 2022.
Medical Savings Account figures have also been updated for the 2023 tax year. Those with self-only coverage must have an annual deductible that is not less than $2,650 (up $200 from 2022), but not more than $3,950 (up $250). Maximum out-of-pocket expense is $5,300, up $350 from 2022. The annual deductible for family coverage is not less than $5,300 (up from $4,950 in 2022), but not more than $7,900 (up $500). The limit on out-of-pocket expenses for family coverage is $9,650 — an increase of $600 from tax year 2022.
