With inflation hitting levels not seen in four decades, the IRS’s annual adjustment of tax brackets and standard deductions is larger this year, producing potential savings for millions of American workers starting in 2023.
The standard deduction will increase by $900 to $13,850 for single filers next year, and by $1,800 to $27,700 for married couples filing jointly.
Tax brackets are moving higher, too, which means that more of an individual’s paycheck will be taxed at a lower rate. The 22% tax rate, for example, will kick in at $44,726 for individuals and $89,451 for married couples filing jointly. This year, by comparison, those income levels are $41,775 and $83,550 respectively. (See the chart below from Axios with all the brackets for 2023.)
“It is very likely that you would see more in your paycheck starting in January [due to the IRS inflation adjustments, which] tend to result in lower withholding for a given level of income,” Mark Luscombe, principal federal tax analyst for Wolters Kluwer Tax & Accounting, told CNN.