High inflation will raise more than 50 tax provisions for 2023 including tax rates and standard deductions. See below for a select summary of Revenue Procedure 2022-38 and Notice 2022-55 which detail those adjustments.
- The Standard Deduction. For married couples filing jointly — $27,700, up $1,800 from the prior year; for single and married filing single — $13,850, up $900; for head of household — $20,800, up $1,400
- Marginal Tax Rates. The rates remain the same for 2023, but the amount of income in each bracket has increased.
- Estates of decedents who die during 2023 have a basic exclusion of $12.92 million, up from a total of $12.06 million for estates of decedents who died in 2022. The annual exclusion for gifts increases to $17,000 for calendar 2023, up from $16,000 for calendar year 2021,
- The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is increased to $22,500, up from $20,500.
- The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is increased to $7,500, up from $6,500. Therefore, participants in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan who are 50 and older can contribute up to $30,000, starting in 2023. The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE plans is increased to $3,500, up from $3,000
- The Alternative Minimum Tax exemption amount rises to $81,300 and begins to phase out at $578,150 ($126,500 for MFJ, with phaseout beginning at $1,156,300).
- For tax year 2023, the foreign earned income exclusion is $120,000, up from $112,000 for tax year 2022.
A lot more than just these items changed. Happy to discuss as it pertains to your individual situation.