With inflation still high, the IRS has announced higher federal income tax brackets and standard deductions for 2023. The changes are roughly a 7% increase of the tax brackets and standard deduction. Unless your income increases by 7% or more in 2023 the changes could result in a lower income tax liability for the year. Of course, that also depends on many other factors.
2023 Federal Income Tax Brackets
Below are tables of the new 2023 tax brackets for single individuals and couples who are married filing jointly.
2023 Marginal Federal Income Tax Brackets for Single Individuals
| Taxable Income | Taxes Owed |
|---|---|
| $11,000 or less | 10% of the taxable income |
| $11,001 to $44,725 | $1,100 plus 12% of the amount over $11,000 |
| $44,726 to $95,376 | $5,147 plus 22% of the amount over $44,725 |
| $95,376 to $182,100 | $16,290 plus 24% of the amount over $95,375 |
| $182,101 to $231,250 | $37,104 plus 32% of the amount over $182,100 |
| $231,251 to $578,125 | $52,832 plus 35% of the amount over $231,250 |
| $578,126 or more | $174,238.25 plus 37% of the amount over $578,125 |
2023 Marginal Federal Income Tax Brackets for Couples Married Filing Jointly
| Taxable Income | Taxes Owed |
|---|---|
| $22,000 or less | 10% of the taxable income |
| $22,001 to $89,450 | $2,200 plus 12% of the amount over $22,000 |
| $89,451 to $190,750 | $10,294 plus 22% of the amount over $89,450 |
| $190,751 to $364,200 | $32,580 plus 24% of the amount over $190,750 |
| $364,201 to $462,500 | $74,208 plus 32% of the amount over $364,200 |
| $462,501 to $693,750 | $105,664 plus 35% of the amount over $462,500 |
| $693,751 or more | $186,602.50 plus 37% of the amount over $693,750 |
Standard Deductions for 2023
The standard deduction for single individuals increases from $12,950 in 2022 to $13,850 for 2023. For couples who are married filing jointly the standard deduction increases from $25,900 in 2022 to $27,700 for 2023.
Contribution Limit Increases for HSAs and FSAs
There are annual contribution limits for HSAs and FSAs. For 2023, those contribution limits are also increasing.
For HSAs in 2023, the individual limit increases from $3,650 to $3,850, and the family limit increases from $7,300 to $7,750. There is also a catch-up contribution amount of $1,000 additional for those age 55 or older. The increases are higher than increases in previous years due to high inflation.
For FSAs in 2023, the maximum salary reduction contribution amount is increasing from $2,850 to $3,050. In addition, the maximum carryover amount is increasing from $570 to $610.
Retirement Plan Contribution Limits for 2023
The contribution limits for 2023 for retirement plans such as 401(k), 403(b), IRA, and Roth IRA accounts have not been released yet. Increases are expected to be greater than in recent previous years due to high inflation. Stay tuned to Escient Financial's Insights for the updated retirement plan contribution limits when they are released.
Tax Planning Opportunities
With these higher tax brackets, standard deductions, and contribution limits, there may be more tax saving opportunities available. As the new year approaches it's a great time to start planning for 2023 to minimize tax liability and increase your opportunities for financial success in the future.
This content is developed from sources believed to be providing accurate information. The information in this material is not intended as investment, tax, or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Digital assets and cryptocurrencies are highly volatile and could present an increased risk to an investors portfolio. The future of digital assets and cryptocurrencies is uncertain and highly speculative and should be considered only by investors willing and able to take on the risk and potentially endure substantial loss. Nothing in this content is to be considered advice to purchase or invest in digital assets or cryptocurrencies.
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