2023 Tax Brackets: IRS Makes Inflation Adjustments
Key Points – 2023 Tax Brackets: IRS Makes Inflation Adjustments
- How Do 2023’s Tax Brackets Compare with 2022’s Tax Brackets?
- Assessing Inflation’s Impact on the 2023 Tax Brackets
- What Could Wage Inflation Look Like in 2023?
- Potential 2023 Tax Law Changes
- Remember, Tax Rates Are Sunsetting in 2026
- 4 Minutes to Read
Comparing 2022 and 2023 Tax Brackets
This fall, we shared some exciting news about Social Security benefits increasing for 2023. That 8.7% cost-of-living adjustment—the highest level since 1981—that Social Security recipients will be getting is due to the monumental inflation we’ve experienced in 2022.
There are obviously a few other things that inflation has an impact on, and one of them is taxes. In October, the IRS released annual inflation adjustments for the 2023 tax year, which includes the 2023 tax brackets. Let’s look at 2023’s tax brackets—both for married filing jointly and single filers—and compare them to 2022’s tax brackets.
2023 Tax Brackets for Married Filing Jointly
- 37% — $693,750.01 and up
- 35% — $462,500.01 – $693,750
- 32% — $364,200.01 – $462,500
- 24% — $190,750.01 – $364,200
- 22% — $89,450.01 – $190,750
- 12% — $22,000.01 – $89,450
- 10% — Up to $22,000
2023 Tax Brackets for Single Filers
- 37% — $578,125.01 and up
- 35% — $231,250.01 – $578,125
- 32% — $182,100.01 – $231,250
- 24% — $95,375.01 – $182,100
- 22% — $44,725.01 – $95,375
- 12% — $11,000.01 – $44,725
- 10% — Up to $11,000
2022 Tax Brackets for Married Filing Jointly
- 37% — $647,850.01 and up
- 35% — $431,900.01 – $647,850
- 32% — $340,100.01 – $431,900
- 24% — $178,150.01 – $340,100
- 22% — $83,550.01 – $178,150
- 12% — $22,550.01 – $83,550
- 10% — Up to $22,550
2022 Tax Brackets for Single Filers
- 37% — $539,900.01 and up
- 35% — $215,950.01 – $539,900
- 32% — $170,050.01 – $215,950
- 24% — $89,075.01 – $170,050
- 22% — $41,775.01 – $89,075
- 12% — $10,275.01 – $41,775
- 10% — Up to $10,275
How Do You Think and Feel About Money?
After the 2023 tax brackets were released, our Director of Tax, Corey Hulstein, noted that there weren’t many major differences from the 2022 tax brackets. But Corey has still been getting some questions about 2023 tax brackets because of how tax brackets scale with inflation. Many of them have been targeted toward the IRMAA Medicare brackets.
It’s reminded him that this really comes down to financial planning 101 and a big part of our Guided Retirement System. One of the first things we need to know about you is how you think and feel about money. That, in turn, is going to shape your thoughts on the 2023 tax brackets. Are the 2023 tax brackets bigger than 2022? Yes. That’s a fact that can’t be disputed. But how much of that is because of inflation? Should there be wage inflation? Your answer to that probably correlates with how you think and feel about money.
“The reality is for people in retirement who haven’t really adjusted their monthly living amount, this is a bit of a good thing because it opens those brackets a little bit more,” Corey said. “For example, we met with someone recently who was taking their same systematic withdrawal out of their IRA account. Well, if we want to do Roth conversions this year and next year, we should be able to do a larger conversion next year because the systematic withdrawal is not changing, but the brackets are increasing.”
Potential 2023 Tax Law Changes
The 2023 tax brackets are set in stone. But there are a few things that remain up in the air regarding 2023 tax law changes. Congress has been looking at extending the required beginning date for Required Minimum Distributions (RMDs). The required beginning date is the date in which you must start taking RMDs from your 401(k) or IRA. Remember that the SECURE Act already extended the RBD for RMDs from 70½ to 72 when it was signed into law just three years ago. Currently, the drop-dead deadline to take your first RMD is April 1 of the year after you turn 72.
The two possibilities that Congress is looking at would extend the RBD for RMDs to 75. Should the SECURE Act 2.0 become law, the RBD for RMDs would shift to April 1 of the year after you turn 73 in 2023. It would then move up to April 1 of the year after you turn 74 in 2030. And it would rise to April 1 of the year after you turn 75 in 2033. If the EARN Act becomes law, the RBD would become April 1 of the year after you turn 75 in 2032.
“We don’t really know what the downside of that yet,” Corey said. “Congress usually gives you a little carrot like that but tries to get something for themselves on the back end. We don’t really know what that is, yet.”
Looking Ahead to 2026
While the 2023 tax brackets and potential tax law changes in the next year are something that you should discuss with your financial advisor, Corey urges you to look beyond 2023. Specifically, you need to think about a big change that will happen in 2026. That’s because the tax brackets for 2026 are sunsetting back to the rates from 2017 (prior to the Tax Cuts and Jobs Act).
Reviewing Tax Planning Strategies
Our article, Tax Rates Sunset in 2026 and Why That Matters, illustrates that tax rates are going up and that the time is now to consider Roth conversions. Still, it’s crucial to consult a tax professional first rather than assuming that Roth conversions will work well for you. Whether it’s Roth conversions or other tax planning strategies, we want you to understand why tax planning is an essential part of the financial planning process.
There’s a big difference between forward-looking tax planning and doing tax compliance each year. Make sure to review our Tax Reduction Strategies Guide so that you’re paying as little tax as possible over your lifetime. Download your copy below.
Download: Tax Reduction Strategies Guide
It All Starts with a Financial Plan
So, whether you have questions about 2023 tax brackets, 2026 tax brackets, or anything about tax laws or tax planning, please reach out to us. When it comes to taxes, you shouldn’t be doing guess work. One oversight can become costly in a hurry. To truly understand how all this impacts you, you need a financial plan. It essentially serves as a permission slip to live your one best financial life leading up to and through retirement.
We’re giving you the opportunity to begin building your financial plan with the same financial planning tool that we use with our clients. You can access it at no cost or obligation from the comfort of your own home. Just click the “Start Planning” button below to begin building your plan today.
There Are No Do-Overs in Retirement
Again, this is your retirement we’re talking about. It’s not something you should be second-guessing. So, let us help you with it. You can schedule a meeting with one of our CFP® Professionals by clicking here. We’re flexible to meet with you for a 20-minute “ask anything” session if you just have a quick question or two. Or we can meet with you for an hour-long complimentary consultation. The meeting can be in person, virtually, or over the phone.
We hope that this article has at least started to clear the air about any questions you have about the 2023 tax brackets or other related topics. If you still have questions, we hope to hear from you soon to see if we can possibly answer them.
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Investment advisory services offered through Modern Wealth Management, LLC, an SEC Registered Investment Adviser.
The views expressed represent the opinion of Modern Wealth Management an SEC Registered Investment Adviser. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.