There is no doubt that the rapidly growing inflation rates seen around the world in 2022 have severely impacted Americans. September 2022 numbers show the US inflation rate hovering at about 8.2% for the previous 12 months(1) as American families struggle to keep up with rising costs of basic needs like food and gas. The silver lining in this (if you can take one away) is there are a number of adjustments various government agencies make to their programs and benefits, based on inflation, which should give a little bit of relief to some households. Social Security benefits and federal tax bracket structure, to name a couple, have recently been adjusted to help offset the burden of inflation currently felt by many Americans.
The IRS recently released adjustments for over 60 tax provisions in response to the overwhelming inflation rates. The two most notable changes impact standard deductions and marginal tax brackets(2). Changes for 2023 are outlined below. Feel free to check out our 2022 FSG Tax Guide, here, to reference the current numbers.
1. Standard deductions will increase across the board beginning in 2023.
a. Married filing jointly – standard deduction increases to $27,700
b. Single filers and Married individuals filing separately – increases to $13,850
c. Head of Household deduction – increases to $20,800
2. Earnings thresholds for tax brackets have been adjusted. Marginal tax rates starting in 2023 are as follows:
- 37% for incomes over $578,125 ($693,750 for married couples filing jointly)
- 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)
- 10% for incomes under $11,000 (under $22,000 for married couples filing jointly)
The U.S. Social Security Administration also recently released their annual cost of living adjustment (COLA) for 2023, increasing benefits by 8.7% in January 2023(3). They also made a number of other changes, including an increase in a few of the benefit maximums(4).
It is apparent, especially over the last few years, that we are living in an ever-changing environment. As such, we anticipate seeing additional changes coming from other government agencies and private company benefit departments in response to inflation. Some of those changes may be beneficial, while others may hurt. If you have any questions on how these things might affect you personally, please feel free to contact us at 800-804-0420 or firstname.lastname@example.org.
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Written by: Kristin Prieur