This post represents 2023 taxes that will be filed in April of 2024.
Preparing for 2023 means understanding all the financial and tax changes that are about to take place. From tax brackets 2023 changes to corporation tax increases, changes to retirement plan contributions, to other updates staying informed is important to your overall wealth management strategy. Here are a few highlights of changes in 2023.
Tax Brackets 2023 – Changes For Individuals
Most of the changes in 2023 for individuals are minor ones. One of the largest changes and updates is to the tax brackets. Luckily, the US tax system is progressive, meaning you pay tax rates on specific income ranges rather than a flat rate overall.
For example, if you and your spouse made a combined $100,000 of income in 2023, your tax obligations would be up to 24% of your income. The math would be:
- $1,100 for the first $11,000 in earnings
- Plus $4,047 for the amounts between $11,001 – $44,755
- Plus $11,143 for the amount up to $95,375
- Plus, $1,110 for the amount between $95,375 and $100,000.
That is a total of $1,100 + $4,047 + $11,143 + $1,110 = $17,400. When people say they are in a 24% tax bracket, they are not paying 24% on all their earnings. It is only the amount for the earnings in that bracket. See below for a table of tax brackets in 2023 for individuals and married couples.
|Rates||Individual||Married filing jointly|
|10%||Less than $11,000 earnings||Less than $22,000 earnings|
|10% of 11,000 ($1,100) plus 12% of amounts over $11,001||Between $11,001 – $44,725||Between $22,000 – $89,450|
|Above amounts plus 22% over $44,725||Between $44,726 – $95,375||Between $89,451 – $190,750|
|Above amounts plus 24% over $95,375||Between $95,376 – $182,100||Between $190,751 – $364,200|
|Above amounts plus 32%||Between $182,101 – $231,250||Between $364,201 – $462,500|
|Above amounts plus 35%||Between $231,251 – $578,125||Between $462,501 – $693,750|
|Above amounts plus 37%||Greater than $578,125||Greater than $693,750|
Business Tax Updates – Corporation Tax Increase 2023
Updates to tax brackets for individuals were a welcome change to many individuals. However, a less welcome update to tax rates is for corporations. In March 2022, the 2023 corporate tax rate was proposed to increase from 21% to 28%. The rate was previously decreased in 2017 from 35% to 21%.
Until the 2023 Federal budget is finalized this rate is not yet in effect.
Standard Deduction Changes
Accounting for higher inflation numbers, the standard deduction has been increased. In 2023, the individual standard deduction is $13,850 (up $900 from 2022) and for married couples filing jointly, increases to $27,700 (up $1,800 from 2022). For the Head of Household (HOH) the deduction is $20,800, up $1,400 from 2022.
Retirement Account Contribution Updates 2023
Are you planning to contribute to your 401k, 403b, IRA, or another retirement plan? You are in luck, as the retirement account contribution amounts for 2023 have increased.
Traditional IRA and Roth IRA contributions are set at $6,500 for those under 55 years of age and $7,500 for those over 55 years. For 401k, 403b, TSP, and 457 plans, the contribution amount for employees is $22,500 for those under 55 years of age and $30,000 for those over 55 years in 2023. There may be specific circumstances for your contribution amounts, so check with your company and tax advisor to ensure you have all the necessary information.
Previous unable to contribute to a Roth IRA? The income limits have also increased, so now may be your time. In 2023, the limits start at $138,000 and phase at $153,000 for individuals and heads of household and $218,000 – $228,000 for married couples filing jointly. These contributions and income amounts are not always straightforward; if you are concerned about your unique circumstances, it is best to consult with a tax advisor who can provide further recommendations.
Tax Changes For 2023
The planned updates and changes in 2023 are much less confusing than in previous years. The major changes to your tax brackets in 2023 and contribution limits are vital areas to know. However, getting advice for your specific situation, investments, real estate, and other assets can make a huge difference in what you may owe or get back. Schedule your free 10-minute consultation today with one of our tax professionals.
Learn more about our tax preparation for clients here. Our services go beyond tax services – we can also help you create a financial and wealth management plan for you and your family. Your Wealth Manager will work side by side (literally) with your CPA to ensure your individualized tax planning strategies and wealth management goals align to do what’s in the best interest of you and your loved ones.