IRS updates tax brackets for 2023 amidst rising inflation

by Jacob Fuller

Vicky Arias, FISM News

 

The IRS announced changes to many tax provisions on Tuesday in an effort to keep up with near 40-year high inflation rates.

The changes include, most notably, increases to income tax brackets and standard deductions, which will kick in for tax year 2023, for taxes filed in 2024.

“The standard deduction for married couples filing jointly for tax year 2023 [will rise] to $27,700, up $1,800 from the prior year,” reports the IRS, and “for single taxpayers and married individuals filing separately, the standard deduction [will rise] to $13,850 for 2023, up $900.”

Deductions reduce the amount of income on which an individual is taxed. Given the current economic climate of soaring inflation, these increased deductions are a lukewarm attempt at giving Americans a chance to break even.

Tax brackets will rise as well, allowing individuals to earn more without being pushed into a higher tax rate bracket, which would cause them to pay more taxes. According to the Wall Street Journal, “for individuals in 2023, the 10% bracket goes up to $11,000, the 12% bracket goes up to $44,725, the 22% bracket goes up to $95,375, the 24% bracket goes up to $182,100, the 32% bracket goes up to $231,250, and the 35% bracket goes up to the top-bracket threshold.”

Tax codes are adjusted on an annual basis, but due to inflation being at a four-decade high, “tax code adjustments are unusually high as well,” reports the Wall Street Journal. In fact, “this is the largest automatic adjustment to the standard deduction since … 1985.”

As adjustments in tax codes attempt to keep pace with inflation, wages do not. Increased inflation does not equal increased salaries. Indeed, “inflation has actually outpaced wage growth over the last year, leading to a decline of 3% in real wages,” according to The Hill.

While soaring inflation triggered major 2023 tax changes, it has also caused many Americans to seek additional employment and work more hours to make ends meet.

A recent poll from Qualtrics International, Inc. surveyed 1,000 American employees and determined that “57% of [them] want the opportunity to work overtime or extra shifts. Outside of their current job, 37% have looked for jobs with higher salaries, and 38% of workers have looked for a second job.”

Rising inflation continues to pummel Americans as individuals struggle to keep their heads above water. According to CNBC, “two-thirds of working adults said they are worse off financially than they were a year ago.”

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