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Before diving into the 2023 tax rates, it is important to understand that the annual inflation rate has been at its highest since the early 80s. Although it is easing a bit in the last two months, this doesn’t mean the prices are going down. The IRS recently announced the standard deduction amounts, 2023 federal income tax brackets, and the increase reflects the high inflation rate we are going through in 2022. This is good news, especially for those whose wages have not increased as much as inflation rates.
The adjustments will apply to tax returns filed in 2024.
The standard deduction amount rises to $27,700, 7% more than the previous year, for married couples filing jointly. The standard deduction for single and married couples but filing separately is $13,850. The standard deduction amount for the head of households will be $20,800. A higher standard deduction means that individuals will lower their taxable income more, resulting in less taxes. Learn how to prepare for taxes with Lunafi by clicking here.
Single Filers: $13,850
Married Filing Jointly: $27,700
Married Filing Separately: $13,850
Head of Households: $20,800
The Marginal Tax Rates have also seen a similar increase of 7% while the brackets keep the same at 0%, 12%, 22%, 24%, 32%, 35%, and 37%. The increase will have more of your income taxed at lower rates.
Here are the 2023 Federal Income Tax brackets for all filing statuses.
These adjustments are the largest since they were first indexed to inflation numbers in 1985 and will take effect in 2023.
Lunafi helps self-employed people with a thorough tax liability estimation, including Self Employment, Federal Income, and State* taxes. If you are self-employed or a freelancer and don’t know much about what business expenses you can write off to lower your tax bill or how much you will pay based on the 2023 tax rates, give Lunafi a try today.
*State taxes are coming soon.
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