The Internal Revenue Service announced Tuesday the annual inflation adjustments for more than 60 tax provisions, including standard deductions, tax brackets and flexible spending accounts.
The changes apply to the tax year 2023, meaning they go into effect on tax returns that will be filed in 2024.
The IRS makes such adjustments yearly, but this year’s adjustments are much higher than usual due to higher inflation numbers.
Here are some of the changes:
Standard deduction: The standard deduction for married couples filing jointly for the tax year 2023 rises to $27,700, up by $1,800 from the prior year.
For single taxpayers and married individuals filing separately, the standard deduction rises to $13,850 for 2023, up by $900.
For heads of households, the standard deduction will be $20,800 for the tax year 2023, up by $1,400.
Marginal rates: For the tax year 2023, the top tax rate remains 37% for individual single taxpayers with incomes greater than $578,125 ($693,750 for married couples filing jointly).
The other rates are:
35% for incomes over $231,250 ($462,500 for married couples filing jointly);32% for incomes over $182,100 ($364,200 for married couples filing jointly);24% for incomes over $95,375 ($190,750 for married couples filing jointly);22% for incomes over $44,725 ($89,450 for married couples filing jointly);12% for incomes over $11,000 ($22,000 for married couples filing jointly).
The lowest rate is 10% for the incomes of single individuals with incomes of $11,000 or less ($22,000 for married couples filing jointly).
Flexible spending: For the taxable years beginning in 2023, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements increases to $3,050. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $610.
Alternative Minimum Tax: The Alternative Minimum Tax exemption amount for the tax year 2023 is $81,300 and begins to phase out at $578,150 ($126,500 for married couples filing jointly, for whom the exemption begins to phase out at $1,156,300).