WASHINGTON (AP) – Taxpayers will get fatter standard deductions in 2023 and all seven federal income tax brackets will be revised upward as the government allows people to shield more of their money from taxation due to persistently high inflation.
For couples filing jointly for the 2023 tax year, the standard deduction increases to $27,700, up $1,800 from the 2022 tax year, the IRS announced. Single and married taxpayers filing separately will see their standard deduction increase to $13,850, up $900, and for heads of household the standard deduction will be $20,800, up $1,400.
The adjustment comes after inflation accelerated in September, with the consumer price index rising 0.4% last month after just 0.1% in August. Inflation rose by 8.2% in the last 12 months.
Some items that were indexed for inflation in the past will remain unchanged, such as the personal exemption, which remains at zero. And the limit on itemized deductions has been eliminated under President Donald Trump.
The government adjusts various benefits and indexes based on inflation.
Last week, the Social Security Administration announced an 8.7 percent increase in cost-of-living adjustments for benefit recipients starting in January 2023.
The cost-of-living adjustment — the largest in more than 40 years — means the average recipient will receive more than $140 a month starting in January, the Social Security Administration said. The maximum amount of earnings subject to Social Security payroll taxes for 2023 is $160,200, up from $147,000 in 2022.