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As the 2023 tax filing season gets underway, millions of Americans may be in for a pleasant surprise: Due to rising inflation, the IRS adjusted its 2023 income limits by about 7% over 2022. That means you may find yourself in a lower tax bracket than you were in last year, which could amount to more tax savings—and even a bigger refund.
This is a welcome change, as many Americans actually received a significantly lower tax refund in 2022 than they did in 2021. Right after the 2022 tax filing deadline, on April 21, 2023, the IRS reported that out of the 134.6 million tax returns it had processed, the average refund amount was only $2,753, which was nearly 10% less than the year before ($3,012). That’s because many of the Covid-19 pandemic-era benefits launched through the American Rescue Plan, like $1,400 per individual Economic Impact Payment, had expired.
The great news is, due to the adjustments in 2023 federal tax brackets, an increase in the standard deduction, as well as proposed enhancements to tax credits, like the Child Tax Credit (which is currently awaiting Senate approval), tax experts say that many Americans can expect to see bigger refunds during the 2023 tax season.
And that might make filing your 2023 taxes a pleasant experience.
What are federal tax brackets?
The IRS uses tax brackets to determine how much tax you owe. They are based on two things:
- Filing status, which is the category you will be filing your taxes in and is dependent on your marital status. The most common categories are single, married filing jointly, married filing separately, and head of household.
- Taxable income, which is the total income you earned for the year, including your salary, bonuses, tips, and earnings from interest, subtracted from any deductions, such as the standard deduction.
Related: How much is the 2023 Child Tax Credit? Has it increased?
The IRS assigns your income to brackets with tax rates that increase as you earn more money. The seven 2023 tax brackets are: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
What are the 2023 federal tax brackets?
2023 Tax Brackets for Single Filers
| Income | Tax rate | Tax due |
|---|---|---|
$0–$11,000 |
10% |
10% of the taxable income |
$11,001–$44,725 |
12% |
$1,100 + 12% of the amount over $11,001 |
$44,726–$95,375 |
22% |
$5,147 + 22% of the amount over $44,726 |
$95,376–$182,100 |
24% |
$16,290 + 24% of the amount over $95,376 |
$182,101–$231,250 |
32% |
$7,104 plus 32% of the amount over $182,101 |
$231,251–$578,125 |
35% |
$52,832+ 35% of the amount over $231,251 |
$578,126 and above |
37% |
$174,238.25 + 37% of the amount over $578,126 |
2023 Tax Brackets for Married Filing Jointly
| Income | Tax rate | Tax due |
|---|---|---|
$0–$22,000 |
10% |
10% of the taxable income |
$22,001–$89,450 |
12% |
$2,200 + 12% of the amount over $22,001 |
$89,451–$190,750 |
22% |
$10,294 + 22% of the amount over $89,451 |
$190,751–$364,200 |
24% |
$32,580 + 24% of the amount over $190,751 |
$364,201–$462,500 |
32% |
$74,208 plus 32% of the amount over $364,201 |
$462,501–$693,750 |
35% |
$105,664+ 35% of the amount over $462,501 |
$693,751 and above |
37% |
$1186,601.50 + 37% of the amount over $693,751 |
2023 Tax Brackets for Married Filing Separately
| Income | Tax rate | Tax due |
|---|---|---|
$0–$11,000 |
10% |
10% of the taxable income |
$11,001–$44,725 |
12% |
$1,100 + 12% of the amount over $11,001 |
$44,726–$95,375 |
22% |
$5,147 + 22% of the amount over $44,726 |
$95,376–$182,100 |
24% |
$16,290 + 24% of the amount over $95,376 |
$182,101–$231,250 |
32% |
$37,104 plus 32% of the amount over $182,101 |
$231,251–$346,875 |
35% |
$52,832+ 35% of the amount over $231,251 |
$346,876 and above |
37% |
$93,300.75 + 37% of the amount over $346,876 |
2023 Tax Brackets for Head of Household
| Income | Tax rate | Tax due |
|---|---|---|
$0–$15,700 |
10% |
10% of the taxable income |
$15,701–$59,850 |
12% |
$1,570 + 12% of the amount over $15,701 |
$59,851–$95,350 |
22% |
$6,868 + 22% of the amount over $59,851 |
$95,351–$182,100 |
24% |
$14,678 + 24% of the amount over $95,351 |
$182,101–$231,250 |
32% |
$35,498 plus 32% of the amount over $182,101 |
$231,251–$578,100 |
35% |
$1,226+ 35% of the amount over $231,251 |
$578,101 and above |
37% |
$172,623.50+ 37% of the amount over $578,101 |
What has changed with 2023 tax brackets?
The IRS adjusted the income limits for all 2023 tax brackets by 7%. Raising these income thresholds could lower your tax liability, thus reducing how much you owe in taxes.
In addition, the IRS increased the standard deduction by $900 for single filers, $1,800 for married filing jointly, and $1,400 for Head of Households.
2023 Standard Deduction
| Filing status | Deduction amount |
|---|---|
Single |
$13,850 |
Married Filing Jointly |
$27,700 |
Head of Household |
$20,800 |
The 2023 maximum Earned Income Tax Credit also increased $495 to $7,430 for qualifying taxpayers with three or more children.
How do tax brackets work?
Figured out your filing status? Do you know what your taxable income is? You can’t just apply your tax rate to this number—instead, you will owe a percentage of tax for each bracket that falls under your total taxable income.
For example, in 2024, a single filer would pay 10% on their first $11,000, then 12% on any additional income up to $15,701; 22% on any additional income up to $59,851, and so on.
Here are a few other important things to know:
- The U.S. uses a progressive tax system, which means that your tax rate increases as your income grows, but it also uses marginal rates, which are different tax rates that are applied to your income as you transcend tax brackets.
- Your effective tax rate is the total percentage of tax you owe on your taxable income. It’s like the sum total of the amount of taxes you owe.
How do I get into a lower tax bracket?
Even if, with inflation adjustments, you still find yourself in the same tax bracket, you can legally reduce your taxable income in a few ways: By contributing to an employer-sponsored retirement plan, an IRA, a health savings account, or a flexible spending account.
- Employer-sponsored retirement plans, like a 401(k) or a 403(b) allow employees to make up to $22,500 in pre-tax contributions for tax year 2023.
- The IRA contribution limit for tax year 2023 is $6,500, with a $1,000 catch-up provision if you’re age 50 or over, but note that the tax setup for IRA contributions are different (you claim a tax deduction for the amount you contributed).
- Flexible spending accounts set aside up to $3,050 in a separate employer-managed account that can be used for medical or dental expenses.
When are 2023 taxes due?
The deadline for filing your 2023 taxes is Tax Day, Monday, April 15, 2024. Residents of Maine and Massachusetts actually have until April 17, 2024, due to state holidays.
Have tax brackets changed for the 2024 tax year?
Here’s more good news: 2024 tax brackets have also been adjusted for inflation, and the standard deduction has gone up, once again, although not as much as in 2023.
