Annual Tax Adjustments for 2023
The Internal Revenue Service has released the tax year 2023 annual inflation adjustments for dozens of tax provisions, including the tax rate schedules and other tax changes. Here are some of the key changes.
The standard deduction for married couples filing jointly for tax year 2023 rises to $27,700, which is up $1,800 from the previous year. For single taxpayers and married individuals filing separately, the standard deduction rises to $13,850 for 2023, up $900, and for heads of households, the standard deduction will be $20,800 for tax year 2023, up $1,400 from the amount for tax year 2022.
For tax year 2023, the top tax rate remains 37 percent for individual single taxpayers with incomes greater than $578,125 ($693,750 for married couples filing jointly).
The other rates are:
- 35 percent for incomes over $231,250 ($462,500 for married couples filing jointly)
- 32 percent for incomes over $182,100 ($364,200 for married couples filing jointly)
- 24 percent for incomes over $95,375 ($190,750 for married couples filing jointly)
- 22 percent for incomes over $44,725 ($89,450 for married couples filing jointly)
- 12 percent for incomes over $11,000 ($22,000 for married couples filing jointly)
The lowest rate is 10 percent for incomes of single individuals with incomes of $11,000 or less ($22,000 for married couples filing jointly).
Alternative minimum tax
The AMT exemption amount for 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). The 2022 exemption amount was $75,900 and began to phase out at $539,900 ($118,100 for married couples filing jointly for whom the exemption began to phase out at $1,079,800).
Estates of decedents who die during 2023 have a basic exclusion amount of $12,920,000, up from a total of $12,060,000 for estates of decedents who died in 2022. Note that many states have their own estate taxes, with lower exclusion amounts.
Gift Tax Increase
The annual exclusion for gift tax increases to $17,000 per individual. This means you can gift up to $17,000 to as many individuals as you wish in 2023 without using up any of your lifetime exclusion. This exclusion only applies to gifts of present interests, so if there are any restrictions on the gifts please contact us for additional guidance.
More information online
A more complete summary is available on the IRS website. The full release—about 28 very technical pages—is also available for downloading. Since many of the provisions are complex, work with your R&A professional to see how your situation is affected.