2023 Tax Rates & Inflation Adjustments

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Income Tax Planning

The IRS released Revenue Procedure 2022-38 (PDF) and Notice 2022-55 (PDF), which detail the tax changes, inflation and cost-of-living adjustments for 2023.

Although the IRS makes these adjustments annually, the continued high inflation rate means that many of the changes this year are more significant than in recent years past. In particular, the adjustment to the income tax brackets is the largest increase since 1985, at 7%. Below, we’ve summarized the adjustments we feel will have the broadest impact. You can also download our two-page 2023 tax reference guide for a more comprehensive overview and reminder of other limits which may impact you. The values reflected in this article are as-of the October 18, 2022, and October 21, 2022, release dates. To the extent any additional changes are introduced after this date, we will update this article and the reference dates so you can be sure you have the most current information.

On a related note, the cost-of-living adjustment (COLA) for Social Security benefits tops the charts at 8.7%. This adjustment replaces last year’s 5.9% as the single largest COLA for Social Security benefits since 1982.

STANDARD DEDUCTION
	2022	2023	Change
Married Filing Jointly¹	$25,900	$27,700	$1,800
Single² and Married Filing Separately¹	$12,950	$13,850	$900
Head of Household²	$19,400	$20,800	$1,400

¹A married filer who is blind or over age 65 can claim an additional $1,500. Two married filers who are both over age 65 or blind can claim $3,000, up $200 from 2022.
²Single or head-of-household filers who are blind or over age 65 can claim an additional $1,850 standard deduction, up $100 from 2022.

ESTATE & GIFT TAX
	2022	2023	Change
Annual Exclusion Gifts	$16,000	$17,000	$1,000
Estate and Gift Tax Basic Exclusion	$12,060,000	$12,920,000	$860,000
Generation Skipping Exemption	$12,060,000	$12,920,000	$860,000

OTHER ADJUSTMENTS
	2022	2023	Change
Long Term Capital Gains Rate Brackets (Married Filing Jointly)	0% – up to $83,350	0% – up to $89,250	0% – $5,900
	15% – up to $517,200	15% – up to $553,850	15% – $36,650
	20% – $517,201 and above	20% – $553,851 and above
Dependent Unearned Income Subject to Parent’s Marginal Rate (“Kiddie Tax”)	Above $2,300	Above $2,500	$200
Health/Medical Savings Account Contribution Limit	$3,650 (self only)	$3,850 (self only)	$200 (self only)
Health/Medical Savings Account Contribution Limit	$7,300 (family)	$7,750 (family)	$450 (family)
Cafeteria plans (Flexible Spending Account) Maximum Contributions	$2,850	$3,050	$200
Adoption Credit for Qualified Expenses (phased out based on MAGI)	$14,890	$15,950	$1.060
Foreign Earned Income Exclusion	$112,000	$120,000	$8,000
Qualified Business Income (Section 199A) Deduction Threshold	$340,100 married filing jointly	$364,200 married filing jointly	$24,100

FEDERAL INCOME TAX RATE SCHEDULES
MARRIED FILING JOINTLY & SURVIVING SPOUSES
	2023	2023 Tax is This Amount Plus this Percentage	Of the Amount Over
10%	Income up to $22,000	$0 plus 10%	$0
12%	$22,001 to $89,450	$2,200 plus 12%	$22,000
22%	$89,451 to $190,750	$10,294 plus 22%	$89,450
24%	$190,751 to $364,200	$32,580 plus 24%	$190,750
32%	$364,201 to $462,500	$74,208 plus 32%	$364,200
35%	$462,501 to $693,750	$105,664 plus 35%	$462,500
37%	Income over $693,750	$186,601.50 plus 37%	$693,750

FEDERAL INCOME TAX RATE SCHEDULES
SINGLE TAXPAYERS
	2023	2023 Tax is This Amount Plus this Percentage	Of the Amount Over
10%	Income up to $11,000	$0 plus 10%	$0
12%	$11,001 to $44,725	$1,100 plus 12%	$11,000
22%	$44,726 to $95,375	$5,147 plus 22%	$44,725
24%	$95,376 to $182,100	$16,290 plus 24%	$95,375
32%	$182,101 to $231,250	$37,104 plus 32%	$182,100
35%	$231,251 to $578,125	$52,832 plus 35%	$231,250
37%	Income over $578,125	$174,238.25 plus 37%	$578,125

Contribution limits for Traditional IRAs, Roth IRAs, and IRA and Elective Deferral Plan catch-up contributions, are all indexed to inflation and will increase for 2023. Adjustments were also made to the AGI Phase-Outs for Roth contributions and deductible IRA contributions. The updated limits and Phase-Outs are below.

CONTRIBUTION LIMITS¹
	2022	2023	Change
Traditional and Roth IRA	$6,000	$6,500	$500
IRA Catch-up Limit² (no change from 2022)	$1,000	$1,000	No change
Elective Deferral Plans^2,3	$20,500	$22,500	$2,000
Elective Deferral Plan Catch-up Limit²	$6,500	$7,500	$1,000

¹ Check with your advisor for the limits applicable to SEP, SIMPLE, and defined contribution plans.
² Catch-up contributions are available for anyone over age 50
³ Elective deferral plans include 401(k) plans, 403(b) plans, most 457 plans, and Thrift Savings plans

AGI PHASE-OUT
ROTH IRA CONTRIBUTIONS
Single/Head of Household	$138,000 to $153,000
Married Filing Joint	$218,000 to $228,000

AGI PHASE-OUT
DEDUCTIBLE IRA CONTRIBUTIONS
Single/Head of Household	$73,000 to $83,000
Married Filing Separate* (not subject to an annual COLA adjustment)	$0 to $10,000
Married Filing Joint (active spouse)	$116,000 to $136,000
Married Filing Joint (non-active spouse)	$218,000 to $228,000

There are many other cost-of-living adjustments for 2023 which may impact you. Review Revenue Procedure 2022-38 (PDF) and Notice 2022-55 (PDF) and consult your CPA to see if there are others you need to be aware of for your specific situation.

This information is believed to be accurate but should not be used as specific investment or tax advice. You should always consult your tax professional or other advisors before acting on the ideas presented here.