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Inflation Stretches to 2023 Tax Provisions

Inflation Stretches to 2023 Tax Provisions

Inflation has infiltrated all layers of our economy including our tax system. In Revenue Procedure 2022-38, the IRS details adjustments for tax year 2023 (filing in 2024) for both businesses and individuals.

  • Adjustments to tax brackets
    • Incomes greater than $578,125 ($693,750 for those married filing jointly) will be taxed at the top rate of 37%
    • 35% for taxpayers earning more than $231,250 ($462,500 for those married filing jointly)
    • 32% for taxpayers earning more than $182,100 ($364,200 for those married filing jointly)
    • 24% for taxpayers earning more $95,375 ($190,750 for those married filing jointly)
    • 22% for taxpayers earning more than $44,725 ($89,450 for those married filing jointly)
    • 12% for taxpayers earning more than $11,000 ($22,000 for those married filing jointly)
    • And 10% for taxpayers earning less than $11,000 ($22,000 for those married filing jointly)
  • Estate exemption threshold increases
    • $12.92 million for those who die in 2023 (increased from $12.06 million)
  • Exclusions for gifting
    • Annual exclusion for gifts rises to $17,000 (up from 16,000 in 2022)
  • Standard deduction amounts have increased
    • Married couples filing jointly: $27,700 an $1,800 increase from 2022
    • Single and married filing separate: $13,850 an increase of $900
    • Head of household: $20,800 an increase of $1,400
  • Alternative minimum tax exemption amounts
    • The exception amount increases to $81,300 with a phase out at $578,150 ($126,500 with a phase out starting at $1,156,300 for those married filing jointly)
  • Earned income tax credit maximums
    • Taxpayers with three or more qualifying children may claim up to $7,430
  • Foreign earned income exclusion rises to $120,000 (up $8,000 from 2022)
  • Change to section 179
    • Aggregate cost of any property that a taxpayer elects to treat as an expense may not exceed $1,160,000

Inflation has impacted over 60 tax provisions for 2023, and the full list can be found in Revenue Procedure 2022-38. It will be important to take all of the applicable items into consideration when tax planning for tax year 2023. Our tax specialists have assisted clients in obtaining the maximum tax savings for decades, and follow all relevant guidance from the IRS.

 

10/24/2022

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