The federal government constantly modifies everything to take inflation into account, from Social Security payouts to retirement account restrictions.
The standard deduction and tax brackets, which are the income levels that determine your tax rate, are two important components of federal income taxes. And 2023 won’t be any different: The IRS has declared that all standard deductions and individual income tax brackets will increase, and by a larger amount than normal, as a result of current inflation rates that are close to a 40-year high.
The 2023 tax year, for which your tax return is due in April 2024, will see changes to the standard deduction and tax rates.
Standard Deductions
Nobody has to pay taxes on every dollar of income. As a result, not all of your income in 2023 will be subject to the tax rate listed below.
Tax deductions, which lower your taxable income, are one factor in this. Around 88% of taxpayers decide against itemizing their tax deductions in favor of the flat-rate standard deduction.
Taxpayers
Regular inflation adjustments are made to the standard deduction. The deduction’s value for 2023 is:
$27,700 if you file your taxes as a married couple filing jointly or as a surviving spouse (an increase of $1,800 from $25,900 in 2022)
If you file your taxes as a head of household, your maximum deduction is $20,800 (up from $19,400 in 2022).
If you are single or married filing separately, your tax filing threshold is $13,850 ($900 more than it was in 2022).
Assuming both parties are under 65, this implies that a married couple filing a joint tax return, for instance, will not owe any taxes on the first $27,700 of their 2023 income if they opt to use the standard deduction.
Other Reports, Social Security Payments
The Social Security Administration’s declaration on October 13 should encourage Social Security users wanting to have more money to spend in 2023.
Social Security retirees will experience the largest cost-of-living adjustment (COLA) since the early 1980s, 8.7%, after getting a 5.9% rise in payments for 2022, a year during which the annual inflation rate ended up jumping as high as 9.1%.
Federal projections show that once the COLA for 2023 is implemented, the typical retired worker’s monthly Social Security benefit payout, which is currently $1,681 per month, would increase to $1,827. That amounts to an extra $146 every month.
The $2,734 monthly average retirement couple’s combined payment will be $2,972. For the two people, that is an additional $238 each month.
