Recent Inflation Causes IRS to Raise Tax Brackets & Standard Deduction by 7%
The Wall Street Journal is reporting that due to rising inflation the IRS has adjusted the Tax Brackets & Standard Deduction for tax year 2023. According to the WSJ, the 37% top marginal tax rate will apply to individual income above $ 578,125 and married couples’ income above $ 693,750 next year, as those thresholds go up 7% from 2022 under inflation adjustments. The standard deduction will climb to $ 27,700 for married couples and $ 13,850 for individuals, both also up about 7% from 2022. In addition, the maximum contribution to healthcare flexible spending accounts will climb to $ 3,050 from $ 2,850.
The IRS says this is the largest automatic adjustment to the standard deduction since core features of the tax system were first indexed to inflation in 1985. Like anything tax-related, please consult your professional for more information.
“Because inflation is higher than at any time in the past four decades, tax code adjustments are unusually high as well. They occur annually under formulas set by Congress and largely match analysts’ projections.” WSJ.com
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