Financial planning feels daunting for many in 2023. High inflation and a potential recession have made deciding how to proceed a challenge. Fortunately, there are certain tax changes for 2023 that could make things a bit easier. Here’s a look at some changes that could affect your 2023 tax year return when you file in 2024.
Higher Standard Deduction
One of the biggest changes during the 2023 tax season is the increased standard deduction. The standard deduction is the amount of earnings you don’t owe federal taxes on, essentially making that portion of your income tax-free.
In tax year 2022, the standard deduction for single filers and married filing separately taxpayers was $12,950. In tax year 2023, the standard deduction for those tax filers increased to $13,850, a difference of $900.
The deduction for heads of household went from $19,400 for tax year 2022 to $20,800 for tax year 2023. For anyone married filing jointly, the standard deduction is going from $25,900 for tax year 2022 to $27,700 for tax year 2023.
Tax filers aged 65 and older are also seeing increases to their additional standard deduction. For single and head of household filers, it’s changing from $1,750 for tax year 2022 to $1,850 for tax year 2023. Married taxpayers age 65 and older will see an increase from $1,400 for tax year 2022 to $1,500 for tax year 2023.
Higher Federal Bracket Limits
For tax year 2023, the marginal tax rates match the rates in 2022. The lowest bracket is 10%, while the highest is 37%. However, the amount of money you can earn before transitioning to the next tax bracket is going up. Here’s an overview of the tax bracket changes.
Single Filers
| 2022 | 2023 | |
| 10% | Up to $10,275 | Up to $11,000 |
| 12% | $10,276 to $41,775 | $11,001 to $44,725 |
| 22% | $41,776 to $89,075 | $44,726 to $95,375 |
| 24% | $89,076 to $170,050 | $95,376 to $182,100 |
| 32% | $170,051 to $215,950 | $182,101 to $231,250 |
| 35% | $215,951 to $539,900 | $231,251 to $578,125 |
| 37% | Over $539,900 | Over $578,125 |
Married Filing Jointly
| 2022 | 2023 | |
| 10% | Up to $20,550 | Up to $22,000 |
| 12% | $20,551 to $83,550 | $22,001 to $89,450 |
| 22% | $83,551 to $178,150 | $89,451 to $190,750 |
| 24% | $178,151 to $340,100 | $190,751 to $364,200 |
| 32% | $340,101 to $431,900 | $364,201 to $462,500 |
| 35% | $431,901 to $647,850 | $462,501 to $693,750 |
| 37% | Over $647,850 | Over $693,750 |
Married Filing Separately
| 2022 | 2023 | |
| 10% | Up to $10,275 | Up to $11,000 |
| 12% | $10,276 to $41,775 | $11,001 to $44,725 |
| 22% | $41,776 to $89,075 | $44,726 to $95,375 |
| 24% | $89,076 to $170,050 | $95,376 to $182,100 |
| 32% | $170,051 to $215,950 | $182,101 to $231,250 |
| 35% | $215,951 to $323,925 | $231,251 to $346,875 |
| 37% | Over $332,925 | Over $346,875 |
Head of Household
| 2022 | 2023 | |
| 10% | Up to $14,650 | Up to $15,700 |
| 12% | $14,651 to $55,900 | $15,701 to $59,850 |
| 22% | $55,901 to $89,050 | $59,851 to $95,350 |
| 24% | $89,051 to $170,050 | $95,351 to $182,100 |
| 32% | $170,051 to $215,950 | $182,101 to $231,250 |
| 35% | $215,951 to $539,900 | $231,251 to $578,100 |
| 37% | Over $539,900 | Over $578,100 |
Retirement Contribution Increases
In 2023, the retirement contribution limits increased. For 401(k)s and (403(b)s – as well as many Thrift Savings Plans and 457 plans – the annual limits went up to $22,500. That’s $2,000 more than the 2022 limit of $20,500.
Additionally, employees who are age 50 or older can make larger catch-up contributions. While catch-up contributions were limited to $6,500 in 2022, the 2023 limit is $7,500, an increase of $1,000.
For anyone with an IRA, the contribution limit also rose by $500. Instead of being limited to $6,000 – which was the cap in 2022 – the maximum for 2023 is $6,500. Additionally, individuals age 50 and older can make catch-up contributions of up to $1,000 in 2023, which is the same amount that was in place in 2022.
