Tax planning is all about thinking ahead. And since the 2023 income tax brackets are already available, you can start thinking about how to handle your 2023 finances in a tax-efficient way — even though it’s still 2022.
The tax rates haven’t changed since 2018. For 2023, they’re still set at 10%, 12%, 22%, 24%, 32%, 35% and 37%. However, the tax brackets are adjusted (or “indexed”) each year to account for inflation. And since inflation has been unusually high lately, the inflation adjustments impact the tax brackets more this year than what we’re used to seeing.
The inflation-adjusted tax brackets for 2023 are below (for the 2022 tax brackets, see What Are the Income Tax Brackets for 2022 vs. 2021?). When using the tax brackets, it’s important to remember that the tax rates only apply to the income that falls within the applicable tax bracket range for your filing status. For instance, a married couple filing a joint return with $100,000 of taxable income in 2023 won’t pay $22,000 in tax just because their total taxable income falls within the 22% bracket for joint filers. The 22% rate is not applied as a flat rate on the entire $100,000. Instead, using marginal tax rates, the first $22,000 of income is taxed at the 10% rate for a tax of $2,200 on that portion of the income. The next $67,450 of income (the amount from $22,000 to $ 89,450) is taxed at the 12% rate for an additional tax of $8,094. Then, only the last $10,550 (the amount over $89,450) is taxed at the 22% rate for $2,321 of tax. That comes to a total tax bill of only $12,615. (That’s $9,385 less than if a flat 22% rate was applied to the entire $100,000.)
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2023 Tax Brackets for Single Filers and Married Couples Filing Jointly
| Tax Rate | Taxable Income (Single) | Taxable Income (Married Filing Jointly) |
|---|---|---|
| 10% | Up to $11,000 | Up to $22,000 |
| 12% | $11,001 to $44,725 | $22,001 to $89,450 |
| 22% | $44,726 to $95,375 | $89,451 to $190,750 |
| 24% | $95,376 to $182,100 | $190,751 to $364,200 |
| 32% | $182,101 to $231,250 | $364,201 to $462,500 |
| 35% | $231,251 to $578,125 | $462,501 to $693,750 |
| 37% | Over $578,125 | Over $693,750 |
2023 Tax Brackets for Married Couples Filing Separately and Head-of-Household Filers
| Tax Rate | Taxable Income (Married Filing Separately) | Taxable Income (Head of Household) |
|---|---|---|
| 10% | Up to $11,000 | Up to $15,700 |
| 12% | $11,001 to $44,725 | $15,701 to $59,850 |
| 22% | $44,726 to $95,375 | $59,851 to $95,350 |
| 24% | $95,376 to $182,100 | $95,351 to $182,100 |
| 32% | $182,101 to $231,250 | $182,101 to $231,250 |
| 35% | $231,251 to $346,875 | $231,251 to $578,100 |
| 37% | Over $346,875 | Over $578,100 |
Inflation’s Impact on the 2023 Brackets
As noted above, high inflation is having a greater impact on the tax bracket ranges this year when compared to other recent years. This shows up when we look at the “width” of the 2023 brackets and see that they got comparatively wider than before. (By width, we mean the amount of income taxed at the applicable rate – so the difference between the bracket’s lowest dollar amount and its highest dollar amount.)
Take, for example, the 22% bracket for single taxpayers. For the 2021 tax year, the bracket ranged from $40,526 to $86,375 and covered $45,849 of taxable income ($86,375 – $40,526 = $45,849). For 2022, the 22% bracket for singles goes from $41,776 to $89,075 and covers $47,299 of taxable income ($89,075 – $41,776 = $47,299). So, from 2021 to 2022, the 22% bracket for single filers got $1,450 wider ($47,299 – $45,849 = $1,450).
For 2023, however, the width of the 22% singles bracket grew by more than twice as much. The 2023 bracket covers $50,649 of taxable income ($95,375 – $44,726 = $50,649), which is $3,350 wider than for 2022.
But that’s OK – wider tax brackets are a good thing, because it helps prevent “bracket creep.” When a bracket gets wider, there’s less of a chance that you’ll end up in a higher tax bracket if your income stays the same or doesn’t grow at the rate of inflation from one year to the next.
Will Income Tax Rates Go Up in the Future?
The Tax Cuts and Jobs Act of 2017 changed the federal income tax rates to what they are now. However, the new rates are only temporary – they expire after 2025. So, starting in 2026, the tax rates are schedule to revert back to the previous rates, which were 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%.
Whether that actually happens or not remains to be seen. If the Democrats can maintain control of the House of Representatives and gain at least one more seat in the Senate during the 2022 midterm elections, then we might see a bill on President Biden’s desk soon to push the top rate from the current 37% back up to 39.6% before 2026. Other rates could be adjusted, too.
Of course, if the Republicans can take control of either the House or Senate, then the odds of such a change are slim to none. Looking forward to 2024, if the Republicans can gain control on Congress and the White House, then there’s a good chance that the current (lower) rates could be extended beyond 2026.