IRS Announces New Tax Brackets for 2023

[scrabbler1]

Someone in Bogleheads posted the link and part of the article about the new income tax and other related brackets for 2023. Below is the link and some of the useful stuff.

https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2023

Copied from the above link:

"The standard deduction for married couples filing jointly for 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 rises to $13,850 for 2023, up $900, and for heads of households, the standard deduction will be $20,800 for tax year 2023, up $1,400 from the amount for tax year 2022.

Marginal Rates: For tax year 2023, the top tax rate remains 37% for individual single taxpayers with incomes greater than $578,125 ($693,750 for married couples filing jointly).

The other rates are:

35% for incomes over $231,250 ($462,500 for married couples filing jointly);
32% for incomes over $182,100 ($364,200 for married couples filing jointly);
24% for incomes over $95,375 ($190,750 for married couples filing jointly);
22% for incomes over $44,725 ($89,450 for married couples filing jointly);
12% for incomes over $11,000 ($22,000 for married couples filing jointly).

The lowest rate is 10% for incomes of single individuals with incomes of $11,000 or less ($22,000 for married couples filing jointly)."

 

[audreyh1]

Thanks. That IRS summary does not mention 2023 Capital Gains tax brackets at all which are important to many here.

2023 capital gains tax rates
For taxes due in April 2024.

Tax-filing status	0% tax rate	15% tax rate	20% tax rate
Single	$0 to $44,625.	$44,626 to $492,300.	$492,301 or more.
Married, filing jointly	$0 to $89,250.	$89,251 to $553,850.	$553,851 or more.
Married, filing separately	$0 to $44,625.	$44,626 to $276,900.	$276,901 or more.
Head of household	$0 to $59,750.	$59,751 to $523,050.	$523,051 or more.

Short-term capital gains are taxed as ordinary income according to federal income tax brackets.

https://www.nerdwallet.com/article/taxes/capital-gains-tax-rates

 

[gauss]

Someone in Bogleheads posted the link and part of the article about the new income tax and other related brackets for 2023. Below is the link and some of the useful stuff.

https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2023

Copied from the above link:

"The standard deduction for married couples filing jointly for 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 rises to $13,850 for 2023, up $900, and for heads of households, the standard deduction will be $20,800 for tax year 2023, up $1,400 from the amount for tax year 2022.

Marginal Rates: For tax year 2023, the top tax rate remains 37% for individual single taxpayers with incomes greater than $578,125 ($693,750 for married couples filing jointly).

The other rates are:

35% for incomes over $231,250 ($462,500 for married couples filing jointly);
32% for incomes over $182,100 ($364,200 for married couples filing jointly);
24% for incomes over $95,375 ($190,750 for married couples filing jointly);
22% for incomes over $44,725 ($89,450 for married couples filing jointly);
12% for incomes over $11,000 ($22,000 for married couples filing jointly).

The lowest rate is 10% for incomes of single individuals with incomes of $11,000 or less ($22,000 for married couples filing jointly)."

edit: My bad -- Comment below retracted -- sorry for the confusion.

[-]I think there may be some problems with this table (at least for MFJ 24% returns).
Here is a link at the Tax Foundation:
https://taxfoundation.org/publications/federal-tax-rates-and-tax-brackets/

I think if the % brackets were adjusted by one line vertically, then it would likely be correct.

By the way, the IRS site seems to have it wrong too! [/-]

-gauss

 

[scrabbler1]

Audrey, those cap gain brackets are buried on page 8-9 of this IRS lengthy pdf file.

https://www.irs.gov/pub/irs-drop/rp-22-38.pdf

The file includes all the changes for 2023 and mentions those which didn't change.

 

[DawgMan]

Sounds like a good time to max out Roth conversions, especially if you are under 63. Word on the street (not playing politics here), if the Republicans take the House and Senate plans are to extend the current tax code. Jest sayen what I heard, nothing more.

 

[jldavid47]

Someone in Bogleheads posted the link and part of the article about the new income tax and other related brackets for 2023. Below is the link and some of the useful stuff.



https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2023



Copied from the above link:



"The standard deduction for married couples filing jointly for 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 rises to $13,850 for 2023, up $900, and for heads of households, the standard deduction will be $20,800 for tax year 2023, up $1,400 from the amount for tax year 2022."

The additional standard deduction for over 65 or blind also increased by $100 from $1400 to $1500. For a couple both over 65 that means a standard deduction of $30,700.

 

[TheWizard]

Tax brackets adjust a bit almost every year, no big surprise.
But I think I'll focus on the 2022 brackets for now, actually the IRMAA projected tiers for 2024...

 

[teejayevans]

When does the poverty levels get announced?

 

[W2R]

This is great! Maybe these new tax brackets will keep some of us from becoming "tax poor" later on due to our 2023 SS COL raises.

 

[niven]

When does the poverty levels get announced?

If you're asking for ACA purposes, the prior year figure is used, so the 2023 tax year will use the 2022 level, which was announced early in the year as $18,310 for a family of 2 (not in Alaska or Hawaii).

https://www.healthcare.gov/glossary/federal-poverty-level-fpl/

 

[googily]

Anyone who can actually do math want to try to figure out what the 15% and 25% brackets would be at now, to get a sense of where they would be heading toward if the current tax brackets expire at the end of 2025? (My forecasting spreadsheet would be grateful!)

 

[scrabbler1]

This is great! Maybe these new tax brackets will keep some of us from becoming "tax poor" later on due to our 2023 SS COL raises.

My ladyfriend just got a big raise (about 8%) and she was concerned that her taxes would rise to offset a good chunk of it. Her TI had just pierced the 22% bracket so we had to adjust her withholding a little for the rest of this year. I ran the numbers using the 2023 brackets on her 2022 income to see what the approximate effect would be. Her taxes will drop about $500 due to the bracket changes, something she was quite happy about.

My (snake-bit) friend will also save about $500. He has a different mix of wage versus investment income, but overall it's about the same as my ladyfriend's. I will save only $90 (10% of the $900 increase in the SD) because my TI is only in the 10% bracket and 0% QDLTCG bracket.

 

[TheWizard]

Both SS and much of the income tax system adjust EVERY YEAR for inflation, so most of us won't see big changes in our tax liability, especially if you're beyond the SS humps and 85% of SS is included in your AGI.

I use percentage withholding on all my retirement income streams so that adjusts automatically.

It's likely that my RMD will be less for next year than this year if the stock market stays about where it is. But I'll likely do a larger Roth conversion to compensate, keeping an eye on projected IRMAA thresholds for two years hence...

 

[TheWizard]

Anyone who can actually do math want to try to figure out what the 15% and 25% brackets would be at now, to get a sense of where they would be heading toward if the current tax brackets expire at the end of 2025? (My forecasting spreadsheet would be grateful!)

This is too complicated to worry about at this point. The bigger question is whether we will get back our state and local tax deductions that we used to have...

 

[audreyh1]

Audrey, those cap gain brackets are buried on page 8-9 of this IRS lengthy pdf file.

https://www.irs.gov/pub/irs-drop/rp-22-38.pdf

The file includes all the changes for 2023 and mentions those which didn't change.

I had searched your original linked announcement page for “capital” and the word was not found, which is why I went searching for that info.

 

[ShokWaveRider]

Is this for taxes filed in April 2023 (for 2022) or for taxes filed in April 2024 (for the actual year 2023)?

 

[audreyh1]

This is for taxes filed in April 2024, so yes for tax year 2023.

We already learned the 2022 tax year numbers this time last year.

 

[ShokWaveRider]

This is for taxes filed in April 2024, so yes for tax year 2023.

We already learned the 2022 tax year numbers this time last year.

Thank you for Clarifying.

 

[Spock]

Anyone who can actually do math want to try to figure out what the 15% and 25% brackets would be at now, to get a sense of where they would be heading toward if the current tax brackets expire at the end of 2025? (My forecasting spreadsheet would be grateful!)

Simple approximation is the $ amounts stay the same and just change the rate on those amounts.

 

[scrabbler1]

I had searched your original linked announcement page for “capital” and the word was not found, which is why I went searching for that info.

You needed to search in this document, the one I posted after my original post:

https://www.irs.gov/pub/irs-drop/rp-22-38.pdf

 

[imnontrad]

Two downsides for next year is that is also raises the "substantial income" criteria AND the income necessary to get a credit to be eligible for SS benefits. Many low income workers might really be impacted. And those who would be impacted by WEP/GPO will have a harder time meeting the minimum income paying into SS to reduce the WEP/GPO impact.

 

[Timeisprecious]

Someone in Bogleheads posted the link and part of the article about the new income tax and other related brackets for 2023. Below is the link and some of the useful stuff.

https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2023

Copied from the above link:

"The standard deduction for married couples filing jointly for 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 rises to $13,850 for 2023, up $900, and for heads of households, the standard deduction will be $20,800 for tax year 2023, up $1,400 from the amount for tax year 2022.

Marginal Rates: For tax year 2023, the top tax rate remains 37% for individual single taxpayers with incomes greater than $578,125 ($693,750 for married couples filing jointly).

The other rates are:

35% for incomes over $231,250 ($462,500 for married couples filing jointly);
32% for incomes over $182,100 ($364,200 for married couples filing jointly);
24% for incomes over $95,375 ($190,750 for married couples filing jointly);
22% for incomes over $44,725 ($89,450 for married couples filing jointly);
12% for incomes over $11,000 ($22,000 for married couples filing jointly).

The lowest rate is 10% for incomes of single individuals with incomes of $11,000 or less ($22,000 for married couples filing jointly)."

Has anyone heard whether charitable giving can be deducted in 2023?

 

[SecondCor521]

Has anyone heard whether charitable giving can be deducted in 2023?

The $300/$600 has gone away as of 2021, so it's not even available this year.

It looks like charitable giving can be deducted on Schedule A as always, but I don't know if the rules there have been changed. I think with the higher standard deductions, most people won't itemize.

So technically yes, but practically no, unless you're very generous or bunch deductions by using a DAF.

QCDs are also still a thing starting at age 70.5 as far as I know.

 

[scrabbler1]

The $300/$600 has gone away as of 2021, so it's not even available this year.

It looks like charitable giving can be deducted on Schedule A as always, but I don't know if the rules there have been changed. I think with the higher standard deductions, most people won't itemize.

So technically yes, but practically no, unless you're very generous or bunch deductions by using a DAF.

QCDs are also still a thing starting at age 70.5 as far as I know.

Bummer, this (I bolded) went away, not that I made a lot of cash contributions I can no longer deduct with the Std. Deduction. Getting back on the ACA premium subsidy train in 2020 has greatly lowered my itemized deduction, so I couldn't itemize even under 2018's pre-TCJA change.

I found a draft version of the 2022 Form 1040 in the IRS website. Looks like they expanded Line 1 but still keep any excess ACA premium subsidy from Form 8962 off Form 1040. I will still have to include Schedule 3 with that one amount and transfer it to Form 1040. What a waste.

https://www.irs.gov/pub/irs-dft/f1040--dft.pdf