23.1 C
Delhi
Friday, December 9, 2022

What the New Federal Tax Brackets Mean for You

Here’s some good news if your wages haven’t kept pace with inflation: you’ll save more money on your taxes in 2023. Every year the IRS re-evaluates its tax brackets and makes changes to reflect the country’s cost of living. On Tuesday, the IRS announced major changes to combat inflation, even more than usual.

The federal agency updated more than 60 tax provisions, some of which will ultimately raise standard deductions and income limits in tax brackets for both individuals and couples filing jointly—giving workers who qualify for the adjustments lower tax rates and more take-home pay beginning in January. Other updates to the tax code also redraw tax exemptions and limits on flexible spending accounts, Earned Income Tax Credit, estates and gift-giving.
[time-brightcove not-tgx=”true”]

Here’s what to know:

ADVERTISEMENT

What this means for individuals

For single taxpayers and married individuals filing separately, the standard deduction—the dollar limit that taxpayers can subtract from their taxed income—boosts to $13,850 for 2023, up $900 from 2022. The maximum tax rate remains at 37%. Here’s how much individuals will pay in taxes according to their incomes:

  • If you make $11,000 or less: You’ll pay 10% of your gross income in taxes
  • If you make between $11,0001 – $4,725: You’ll pay $1,100 + 12% of gross income over $11,000
  • If you make between $44,726 – $95,375: You’ll pay $5,147 + 22% of gross income over $44,72
  • If you make between $95,376 – $182,100: You’ll pay $16,290 + 24% of gross income over $95,375
  • If you make between $182,101 – $231,250: You’ll pay $37,104 + 32% of gross income over $182,100
  • If you make between $231,251 – $578,125: You’ll pay $52,832 + 35% of gross income over $231,250
  • If you make $578,126 or more: You’ll pay $174,238.25 + 37% of gross income over $578,125

What this means for married couples

For married couples filing their taxes jointly, the standard deduction in 2023 rises to $27,700, an $1,800 increase. Here’s how much couples will pay in taxes according to their incomes:

  • If you make $22,000 or less: You’ll pay 10% of your gross income in taxes
  • If you make between $22,001 – $89,450: You’ll pay $2,200 + 12% of gross income over $22,000
  • If you make between $89,451 – $190,750: You’ll pay $10,294 + 22% of gross income over $89,45
  • If you make between $190,751 – $364,200: You’ll pay $32,580 + 24% of gross income over $190,750
  • If you make between $364,201 – $462,500: You’ll pay $74,208 + 32% of gross income over $364,20
  • If you make between $462,501 – $693,750: You’ll pay $105,664 + 35% of gross income over $462,500
  • If you make $693,751 or more: You’ll pay $186,601.50 + 37% of gross income over $693,75

Other changes in the tax code

Other changes to certain widely-used tax credits could be helpful for low to moderate-income filers. The Earned Income Tax Credit, which helps working-class filers get a tax break, will raise its claim limit to $7,430 for households with at least three children, a jump of nearly $500. Flexible spending accounts—which allow workers to set aside money for medical expenses and eventually withdraw those savings before incurring taxes—will have a higher contribution limit of $3,050 next year, compared to this year’s limit of $2,850.

Wealthy Americans will have some opportunities to qualify for asset tax exemptions in 2023. The IRS will exempt up to $12.92 million before taxing a deceased person’s estate, a jump of more than 7% from last year. Tax-exempt gifts will also increase from a value limit of $16,000 to $17,000 in 2023.

ADVERTISEMENT

For low-income individuals who may usually opt out of filing tax returns because they aren’t required to, the IRS in a separate announcement last week said that doing so is the only way for people to claim benefits they were eligible for in 2021 but didn’t accept. More than nine million families may be eligible to claim missed stimulus payments, Child Tax Credit and other benefits, so the agency has extended the filing portal until Nov. 17.

from TIME
via Time.com

Support Us

Secured by Paypal

Related Stories

Check out other tags:

Most Popular Articles