On Tuesday, October 18th, 2022, the IRS issued Revenue Procedure 2022-38 releasing the annual inflation adjustments for 2023.
Congress had codified the annual inflation adjustments as part of the 1981 Reagan tax cuts that went into effect in 1985. Over sixty tax provisions were adjusted including:
2023 Standard Deduction
- $27,700 for married individuals filing jointly and surviving spouses (increase of $1,800 over 2022)
- $20,800 for head of household (increase of $1,400 over 2022)
- $13,850 for single individuals and married individuals filing separately (increase of $900 over 2022)
2023 Income Tax Brackets
The top individual tax rate stays at 37% applying when taxable income exceeds:
- $693,750 Married filing joint (MFJ) (increase of $65,450 over 2022)
- $578,125 Single (increase of $54,525 over 2022)
- $578,100 Head of household (increase of $54,500 over 2022)
- $346,875 Married filing Separate (increase of $32,725 over 2022)
- $14,450 Estates and Trusts (increase of $1,400 over 2022)
2023 Alternative Minimum Tax (AMT) Exemption
- $126,500 for married individuals filing jointly and surviving spouses (increase of $8,400 over 2022)
- $81,300 for single individuals and head of households (increase of $5,400 over 2022)
- $63,250 for married individuals filing separately (increase of $4,200 over 2022)
- 28,400 for estates and trusts (increase of $5,900 over 2022)
2023 Earned Income Tax Credit
The maximum earned income tax credit increases to $7,430 for qualifying taxpayers who have three or more qualifying children (increase of $495 over 2022).
2023 Estate and Gift Tax Adjustments
The federal estate exclusion increases to $12,920,000 (increase of $860,000 over 2022).
The annual gift tax exclusion increases to $17,000 (increase of $1,000 over 2022).
Expensing Code Sec. 179 Property in 2023
Taxpayers can expense up to $1,160,000 in eligible Code Sec. 179 property in 2023 (increase of $80,000 over 2022) with the dollar investment limitation of $2,890,000 (increase of $190,000 over 2022).
Qualified Transportation Fringe Benefit
The monthly limitation for the qualified transportation fringe benefit and the qualified parking is $300 in 2023 (increase of $20 over 2022).
Health Flexible Spending Accounts
The dollar limitation for employee salary reductions for contributions to health flexible spending arrangements is $3,050 in 2023 (increase of $200 over 2022).
You can see all of the adjustments in IRS Revenue Procedure 22-38 here.