During the tax year of 2023, the IRS will help taxpayers deal with inflation adjustments in various ways. These include increased standard deductions, higher income limits, and other tax changes. Some taxpayers may even see significant tax savings during that year.
Even though the IRS has adjusted its tax rate schedules, it is still possible to save hundreds of dollars in taxes next year. That’s because high inflation is driving up the cost of living for millions of Americans. That’s why the IRS adjusted its tax code for the 2023 tax year. So, what change did the IRS make for 2023 to help taxpayers deal with inflation?
Last year, consumers across the country experienced a significant inflation increase. This increase has been felt at gas pumps and at grocery stores. Many people are hoping that wage gains will help offset inflation. However, living costs have increased so much that average wage gains have remained stagnant.
In response, the IRS has made significant adjustments to individual income tax brackets for 2023. Here’s everything you should know about the IRS adjustments for high inflation.
Tax Year 2023 Annual Inflation Adjustments
During the tax year of 2023, IRS inflation adjustments will help many taxpayers stay in a lower tax bracket. While the effects of this change may not be felt until April of the next year, millions of Americans will see a reduction in their tax bills.
Inflation adjustments will affect the value of federal tax credits and deductions. This will vary depending on the amount of income and other income sources a taxpayer earns.
IRS inflation adjustments will also help taxpayers avoid “bracket creep,” the phenomenon that pushes some workers into higher tax brackets. During the year 2023, the standard deduction will rise to $1800 for married couples filing jointly. This will increase the standard deduction by about one percent.
The IRS has boosted the taxable income thresholds for seven of the tax brackets. In addition, the standard deduction has increased by about 7%. These increases will benefit most taxpayers. If you are concerned about how these changes will affect your taxes, you should consult with your tax preparer.