Do you find yourself groaning every time you check out at the grocery store? Are you tired of it costing an arm and a leg to fill up your car with gas? Americans are feeling the effects of rising prices for goods and services across all industries. Although inflation has been in the back of everyone’s mind, you may catch a little break this tax season.
Due to the rising inflation rate, the Internal Revenue Service raised income tax brackets’ thresholds in 2023. Along with the standard deduction increasing to $27,700 for couples filing together and $13,850 for single taxpayers, there are additional adjustments to the alternative minimum tax, estate tax exemption, earned income tax credit, and flexible spending account limits.
What does this mean for taxpayers? The changes to the 2023 tax brackets may result in you having a smaller tax bill.
Tax changes don’t need to be stressful or confusing. AA Tax & Accounting Services, LLC is here to walk you through the tax bracket changes impacting your 2023 taxes so you can feel confident as we head into tax season.
2023 Tax Bracket Changes
In the United States, taxpayers face higher rates as they increase their income. These rates remain unchanged for 2023. However, the income taxed at each of these rates is being adjusted.
This tax season, a single filer with a taxable income of $90,000 will have a rate of 22%, which has been reduced from the previous year’s rate of 24%. Assuming no changes to their income level, this results in tax savings.
Here’s a breakdown of the math behind that. At quick glance, you may be wondering if your tax bill in 2022 took 24% flat off the top. In short, it did not. Using marginal tax rates, only a portion of your income was taxed at the 24% rate. The rest was taxed at the 10%, 12%, and 22% rates. The same marginal tax rates apply this year as well.
Looking at a single filer earning $90,000 annually in 2023, the first $11,000 of your income is taxed at the 10% rate for $1,100 of tax. The next $33,725 of income (the amount from $11,001 to $44,725) is taxed at the 12% rate for an additional $4,047 of tax.
After that, the next $45,275 of your income (from $44,726 to $95,375) is taxed at the 22% rate for $9,960 of tax.
Whereas in 2022, there would have also been a portion of your income that would be taxed at the 24% rate. When you add it all up, your total 2023 tax is $15,107 — which is $4,693 less than if you were taxed your income by a flat 22% rate.
When filing your taxes, you will not be required to take any special steps to take advantage of the adjusted tax brackets. They will be automatically applied based on your annual income.
Tax Consulting Services in Cedar City, Utah
While everything is getting more expensive with inflation rates, taxpayers may be able to catch a break this tax season with a lower tax bill. If you are still determining how the adjustments to tax brackets are going to impact you and your filing status in 2023, we can help.
If you’d like to feel confident in how these tax bracket changes affect your taxes, we recommend consulting certified public accountants like AA Tax & Accounting Services when making any decisions or changes to your tax return.
From one-time tax consulting services to ongoing consulting services, our tax consultants work with many clients as both their tax advisors and tax preparer — ensuring that your tax team understands your taxes backward and forwards.
You can have peace of mind knowing that our team has the experience to provide you with the most effective strategies for maximizing deductions and tax credits with our tax consulting services.
The AA Tax & Accounting Services team can help you execute the right tax strategies to save you money come tax season. Contact us to schedule an appointment.