The Internal Revenue Service announced the tax year 2023 annual inflation adjustments for more than 60 tax provisions, including tax rate schedules and other tax changes.
Revenue Procedure 2022-38 provides details about these annual adjustments.
Highlights: Revenue Procedure 2022-38
(Note: The adjustments described below generally apply to tax returns filed in 2024.)
- The standard deduction for married couples filing jointly for the tax year 2023 rises to $27,700, up $1,800 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction increases to $13,850 for 2023, up $900, and for heads of households, the standard deduction will be $20,800 for the tax year 2023, up $1,400 from the amount for the tax year 2022.
- Marginal Rates: For the tax year 2023, the top tax rate remains 37 percent for individual single taxpayers with incomes higher 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 single individuals with incomes of $11,000 or less ($22,000 for married couples filing jointly).
- 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). 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 started to phase out at $1,079,800).
- The tax year 2023 maximum Earned Income Tax Credit amount is $7,430 for qualifying taxpayers with three or more children, up from $6,935 for the tax year 2022. The revenue procedure contains a table providing the maximum EITC amount for other categories, income thresholds, and phase-outs.
- For the tax year 2023, the monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking increases to $300, up $20 from the limit for 2022.
- 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, an increase of $40 from taxable years beginning in 2022.
- For tax year 2023, the foreign earned income exclusion is $120,000 up from $112,000 for tax year 2022.
- 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.
- The annual exclusion for gifts increases to $17,000 for the calendar year 2023, up from $16,000 for the calendar year 2022.
- The maximum credit allowed for adoptions for the tax year 2023 is the amount of qualified adoption expenses up to $15,950, up from $14,890 for 2022.
Items Unaffected By Indexing
Certain past items previously indexed for inflation are currently not adjusted by statute.
- The personal exemption for the tax year 2023 remains at 0, as it was for 2022. This personal exemption elimination was a provision in the Tax Cuts and Jobs Act.
- There is no limitation on itemized deductions for 2023, as in 2022, 2021, 2020, 2019, and 2018, as the Tax Cuts and Jobs Act eliminated that limitation.
- The modified adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit provided in § 25A(d)(2) is not adjusted for inflation for taxable years beginning after December 31, 2020. The Lifetime Learning Credit phases out for taxpayers with a modified adjusted gross income of more than $80,000 ($160,000 for joint returns).