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IRS Tax Updates for 2023

Last week the IRS announced its annual inflation adjustments for various tax provisions in the tax year 2023. Below are some of the items we believe would be of interest to many.

Updated Tax Brackets

  • 10% for income up to $22,000 MFJ, $11,000 Single
  • 12% for income up to $89,450 MFJ, $44,725 Single
  • 22% for income up to $190,750 MFJ, $95,375 Single
  • 24% for income up to $364,200 MFJ, $182,100 Single
  • 32% for income up to $462,500 MFJ, $231,250 Single
  • 35% for income up to $693,750 MFJ, $578,125 Single
  • 37% for income over $693,750 MFJ, $578,125 Single

Maximum Capital Gains Rate

For married couples the zero-rate amount is now $89,250. The maximum 15% rate amount is $553,850. For single files those rates are $44,625 and $492,300, respectively.

Updated Standard Deduction

The standard deduction across all filing types is set to increase. The deduction for married couples filing jointly will increase by $1,800 for 2023. The deduction will be $27,700. Similarly, the deduction for single filers will be increased by $900, for an updated deduction of $13,850. For head of household filers, the increase is $1,400 resulting in a standard deduction of $20,800.

Increased 401(k) contribution limits

The amount individuals can contribute to their 401(k) plans for 2023 has been increased to $22,500 for 2023. Additionally, the catch-up contribution for individuals over the age of 50 has also been increased to $7,500. The annual contribution limit for those contributing to an IRA was increased to $6,500

Annual Exclusion for Gifts

For the calendar year 2023, the first $17,000 of gifts to any person is not included in the total amount of taxable gifts made during the year. This is a per person exclusion. A married couple could give any one person $34,000 ($17,000 each).

Estate Basic Exclusion

For estates of decedents who die during 2023 the basic exclusion amount has increased by $860,000. The 2023 exclusion amount is $12,920,000.