02.22.23

Can Inflation Impact your Taxes and other Notable IRS Changes for Tax Year 2023


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The recent struggles with inflation began in 2021, on the heels of the Covid pandemic. While persistently high inflation is hardly cheerful news, a set of annual adjustments from the IRS that are tied to an inflation index could provide relief in one unexpected area — taxes.

Last October, the IRS announced the adjustments for the 2023 tax year. As a result, many key provisions — including income thresholds for the federal tax brackets  — will increase by about 7% overall to account for the sky-high inflation Americans have seen throughout 2022. This larger-than-usual adjustment could mean many folks may stay in a lower tax bracket; some may even have a lower tax burden than the previous year.

What else will change for tax year 2023? Let’s take a look:

 

  • The IRS exclusion for gifts, which limits how much taxpayers can give to a person without filing a gift tax return on certain gifts, will increase to $17,000 per person in 2023, up $1,000 from 2022.
  • Beginning in 2023, estates valued at or below $12.92 million will not be subject to estate tax, up from $12.06 million in 2022.
  • Each year, taxpayers can itemize their return or take the standard deduction to lower their taxable income.  Starting with the 2023 tax year, the standard deduction will increase by $900 for single filers and those married filing separately, $1,800 for married couples, and $1,400 for heads of household. The standard deduction is also $1,500 higher for those over 65 or blind (up from $1,400 in 2022) and $1,850 higher if also unmarried and not a surviving spouse (up from $1,750 in 2022).

 

Learn more about other recent updates that may effect you or your business here.