Standard deductions for taxpayers will increase in size for 2023, and all seven federal income tax bracket levels will be raised due to the government allowing individuals to defer more of their income from taxes due to continuously rising inflation.
According to the IRS, the standard deduction for married couples filing jointly will rise to $27,700 in the tax year 2023, an increase of $1,800 from the tax year 2022.
The standard deduction for single taxpayers and married individuals filing separately will increase by $900 to $13,850, while the standard deduction for heads of household will increase by $1,400 to $20,800.
According to the Consumer Price Index, the changes were made as inflation picked up in September, climbing 0.4%, following only 0.1% in August.
The past year has seen an 8.2% increase in inflation.
The personal exemption, which stays at zero, is one of the things that was previously indexed for inflation.
Additionally, President Donald Trump reduced the itemized deduction cap.
Based on inflation, the government modifies several perks and indexes.
The Social Security Administration last week disclosed an increase in the cost of living adjustment for beneficiaries starting in January 2023 of 8.7%.
The typical beneficiary will start receiving more than $140 more per month starting in January thanks to the cost-of-living adjustment, which is the greatest in more than 40 years, according to the Social Security Administration.
In 2023, earnings up to $160,200 will be subject to Social Security payroll taxes, an increase from $147,000 in 2022.