Taxes

Tax Inflation Adjustments for 2023

Updated on October 27, 2022

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The Internal Revenue Service (IRS) tweaks certain tax provisions each year to keep pace with inflation. The idea is to prevent taxpayers from losing out on various tax breaks because they might be earning a bit more than they did the year before, based on inflation. Tax thresholds and tax breaks such as deductions and credits should keep pace with the economy.

The IRS typically announces inflation adjustments for the upcoming tax year in October or November. The agency announced more than 60 tax provisions for the 2023 tax year (the return you’ll file in 2024) on Oct. 18, 2022. Knowing what they are and how they work can help you plan your tax strategies and your spending in 2023.

Key Takeaways

The IRS adjusts numerous tax provisions annually to keep pace with the growing effect of inflation.
The effects of inflation adjustments impact qualifying thresholds of income for various tax breaks, as well as the amount of the standard deduction and certain tax credits.
Tax rates don’t change unless new tax law changes come into effect, but the income brackets they apply to can be adjusted, so it’s important to know where your anticipated income falls each year.

The 2023 Tax Brackets

The U.S. tax system is progressive. You pay a higher percentage in taxes as you earn more. The tax system is based on marginal tax rates and brackets. This means you won’t pay 24% on all your income if you’re in the 24% tax bracket. You’ll only pay this rate on the portion of your income that falls into the parameters for that 24% bracket. You’ll pay 10%, 12%, and 22% on the rest of your income below that threshold.

Inflation adjustments don’t affect the tax rates (the percentage you pay); they only change the income brackets to which the percentages apply.

2023 Tax Rates and Brackets for Single and Married Filing Separately

The table below shows the income brackets and the corresponding rates for tax year 2023 for single filers and for those who are married but filing separate returns.

Tax Rate	Income Bracket
10%	$0 to $11,000
12%	$11,001 to $44,725
22%	$44,726 to $95,375
24%	$95,376 to $182,100
32%	$182,101 to $231,250
35%	$231,251 to $578,125
37%	$578,126 or more

2023 Tax Rates and Brackets for Heads of Household

Those who qualify as head of household can earn a little more than single filers before moving into the next tax bracket, at least at lower income levels.

Tax Rate	Income Bracket
10%	$0 to $15,700
12%	$15,701 to $59,850
22%	$59,851 to $95,350
24%	$95,351 to $182,100
32%	$182,101 to $231,250
35%	$231,251 to $578,100
37%	$578,101 or more

2023 Tax Rates and Brackets for Married Filing Jointly

The income spans are the most generous for taxpayers who are married and file joint returns. They're double what they are for single filers so they can accommodate two potential earners.

Tax Rate	Income Bracket
10%	$0 to $22,000
12%	$22,001 to $89,450
22%	$89,451 to $190,750
24%	$190,751 to $364,200
32%	$364,201 to $462,500
35%	$462,501 to $693,750
37%	$693,751 or more

2023 Standard Deductions

The standard deduction is an amount you can subtract from your overall gross income so you only pay income tax on the balance. These also differ by filing status. Below are the standard deduction rates for tax year 2023, which apply to the tax return you’ll file in 2024.

Filing Status	Standard Deduction
Single or Married Filing Separately	$13,850
Head of Household	$20,800
Married Filing Jointly	$27,700

2023 Capital Gains Tax Rates and Income

Capital gains tax can come due when you sell an asset or investment for more than you paid for it. The difference can be taxed at more favorable rates than ordinary income tax brackets, depending on how long you owned the asset.

Gains are taxed at ordinary tax rates along with the rest of your income if you owned the asset for one year or less. Long-term capital gains rates apply to income from assets you held for more than one year.

Single

Income Threshold	Tax Rate
$44,625 or less	0%
$44,626 to $492,300	15%
$492,301 or more	20%

Head of Household

Income Threshold	Tax Rate
$59,750 or less	0%
$59,751 to $523,050	15%
$523,051 or more	20%

Married Filing Jointly

Income Threshold	Tax Rate
$89,250 or less	0%
$89,251 to $553,850	15%
$553,851 or more	20%

The 2023 Alternative Minimum Tax

The alternative minimum tax (AMT) is a provision that prevents high earners from claiming so many tax breaks that they reduce their income to the point where they pay negligible income tax on their earnings. You must calculate your income tax twice if you earn over a certain income threshold: once according to the usual rules, then again using AMT rules.

The AMT adds back certain deductions and income exclusions that you might claim under the usual rules to bring down your taxable income. You would then pay whichever method results in a higher tax.

The AMT excludes income up to certain thresholds based on your filing status. You only need to calculate the AMT if you earn more than $81,300 as a single filer in tax year 2023. It begins to phase out at $578,150. Married taxpayers filing jointly must calculate the AMT if they earn $126,500 or more. It begins to phase out at $1,156,300.

Tax Credits and Other Increases for 2023

Deductions, such as the standard deduction, subtract from your income to arrive at the amount that's taxed, but tax credits are better. They subtract directly from what you owe the IRS. Inflation adjustments apply to many of these, too, as well as to some other tax perks.

Earned Income Tax Credit

The maximum earned income tax credit for those who meet the income requirements and who have three or more dependent children increases to $7,430 in 2023.

The Child Tax Credit

The amount of the child tax credit isn’t adjusted for inflation, but the portion of the credit that can be claimed as a tax refund is. That amount is $1,600 for the 2023 tax year.

The Adoption Tax Credit

The maximum credit for adoption expenses increases to $15,950 in 2023.

Flexible Spending Accounts

Inflation-adjusted limits also apply to the amounts that you can save for various retirement plans and other advantageous savings plans, and they exclude those contributions from taxation. You can contribute up to $3,050 to a health flexible spending arrangement (also known as a flexible spending account, or FSA) in 2023.

Estate Taxes

Very large estates must pay a federal estate tax on the portion of their values over certain thresholds, and these thresholds are also indexed for inflation. The first $12.92 million will be tax-free in 2023.

Gift Taxes

The federal gift tax applies to gifts you make to individuals (not to charities) over a certain amount each year. This amount is referred to as the annual exclusion, and it’s per person, per year. It increases to $17,0000 in tax year 2023.

Frequently Asked Questions (FAQs)

What causes inflation?

Inflation is the increase in the prices of goods and services in an economy. It’s measured by looking at the increases in prices in one year from what they were the year before. You can buy fewer goods and services with the same amount of money as inflation increases. It can be caused by increased demand and decreased supply, or when the cost of producing goods and services increases, resulting in higher prices.

What is the inflation adjustment for Social Security?

As with tax brackets, credits, deductions, and more, Social Security benefits also keep pace with inflation through cost-of-living adjustments (COLA). Social Security and Supplemental Security Income (SSI) benefits that are payable as of January 2023 will see an 8.7% COLA increase.

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Sources

The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.

IRS. “IRS Provides Tax Inflation Adjustments for Tax Year 2023.”
Tax Foundation. “2023 Tax Brackets.”
Social Security Administration. “Social Security Benefits Increase in 2023.”