Leonid, Adobe Stock
October 18, 2022

2023 Tax Brackets

On a yearly basis the Internal Revenue Service (IRS) adjusts more than 60 tax provisions for inflation to prevent what is called “bracket creep.” Bracket creep occurs when people are pushed into higher income tax brackets or have reduced value from credits and deductions due to inflation, instead of any increase in real income.

The IRS used to use the Consumer Price Index (CPI) as a measure of inflation prior to 2018. However, with the Tax Cuts and Jobs Act of 2017 (TCJA), the IRS now uses the Chained Consumer Price Index (C-CPI) to adjust income thresholds, deduction amounts, and credit values accordingly.

The new inflation adjustments are for tax year 2023, for which taxpayers will file tax returns in early 2024. Note that the Tax Foundation is a 501(c)(3) educational nonprofit and cannot answer specific questions about your tax situation or assist in the tax filing process.

2023 Tax Brackets and Rates

In 2023, the income limits for all tax brackets and all filers will be adjusted for inflation and will be as follows (Table 1). There are seven federal income tax rates in 2023: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent. The top marginal income tax rate of 37 percent will hit taxpayers with taxable income above $539,900 for single filers and above $693,750 for married couples filing jointly.

2023 Federal Income Tax Brackets and Rates for Single Filers, Married Couples Filing Jointly, and Heads of Households
Tax Rate For Single Filers For Married Individuals Filing Joint Returns For Heads of Households
10% $0 to $11,000 $0 to $22,000 $0 to $15,700
12% $11,000 to $44,725 $22,000 to $89,450 $15,700 to $59,850
22% $44,725 to $95,375 $89,450 to $190,750 $59,850 to $95,350
24% $95,375 to $182,100 $190,750 to $364,200 $95,350 to $182,100
32% $182,100 to $231,250 $364,200 to $462,500 $182,100 to $231,250
35% $231,250 to $578,125 $462,500 to $693,750 $231,250 to $578,100
37% $578,125 or more $693,750 or more $578,100 or more

Source: Internal Revenue Service

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Standard Deduction and Personal Exemption

The standard deduction will increase by $900 for single filers and by $1,800 for joint filers (Table 2).

The personal exemption for 2023 remains at $0 (eliminating the personal exemption was part of the Tax Cuts and Jobs Act of 2017 (TCJA).

2023 Standard Deduction
Filing Status Deduction Amount
Single $13,850
Married Filing Jointly $27,700
Head of Household $20,800

Source: Internal Revenue Service. 

Alternative Minimum Tax (AMT)

The Alternative Minimum Tax (AMT) was created in the 1960s to prevent high-income taxpayers from avoiding the individual income tax. This parallel tax income system requires high-income taxpayers to calculate their tax bill twice: once under the ordinary income tax system and again under the AMT. The taxpayer then needs to pay the higher of the two.

The AMT uses an alternative definition of taxable income called Alternative Minimum Taxable Income (AMTI). To prevent low- and middle-income taxpayers from being subject to the AMT, taxpayers are allowed to exempt a significant amount of their income from AMTI. However, this exemption phases out for high-income taxpayers. The AMT is levied at two rates: 26 percent and 28 percent.

The AMT exemption amount for 2023 is $81,300 for singles and $126,500 for married couples filing jointly (Table 3).

2023 Alternative Minimum Tax (AMT) Exemptions
Filing Status Exemption Amount
Unmarried Individuals $81,300
Married Filing Jointly $126,500

Source: Internal Revenue Source

In 2023, the 28 percent AMT rate applies to excess AMTI of $220,700 for all taxpayers ($110,350 for married couples filing separate returns).

AMT exemptions phase out at 25 cents per dollar earned once AMTI reaches $578,150 for single filers and $1,156,300 for married taxpayers filing jointly (Table 4).

2023 Alternative Minimum Tax (AMT) Exemption Phaseout Thresholds
Filing Status Threshold
Unmarried Individuals $578,150
Married Filing Jointly $1,156,300

Source: Internal Revenue Service. 

Earned Income Tax Credit (EITC)

The maximum Earned Income Tax Credit (EITC) in 2023 for single and joint filers is $560 if the filer has no children (Table 5). The maximum credit is $3,995 for one child, $6,604 for two children, and $7,430 for three or more children.

2023 Earned Income Tax Credit (EITC) Parameters
Filing Status   No Children One Child Two Children Three or More Children
Single or Head of Household Income at Max Credit $7,840 $11,750 $16,510 $16,510
Maximum Credit $600 $3,995 $6,604 $7,430
Phaseout Begins $9,800 $21,560 $21,560 $21,560
Phaseout Ends (Credit Equals Zero) 17,640 46,560 52,918 56,838
 
Married Filing Jointly Income at Max Credit $7,840 $11,750 $16,510 $16,510
Maximum Credit $600 $3,995 $6,604 $7,430
Phaseout Begins $16,370 $28,120 $28,120 $28,120
Phaseout Ends (Credit Equals Zero) 24,210 53,120 59,478 63,398

Source: Internal Revenue Service

Child Tax Credit

The maximum Child Tax Credit is $2,000 per qualifying child and is not adjusted for inflation. The refundable portion of the Child Tax Credit is adjusted for inflation and will increase from $1,500 to $1,600 for 2023.

Capital Gains Tax Rates & Brackets (Long-term Capital Gains)

Long-term capital gains are taxed use different brackets and rates than ordinary income (Table 6.)

2023 Capital Gains Tax Brackets
  For Unmarried Individuals, Taxable Income Over For Married Individuals Filing Joint Returns, Taxable Income Over For Heads of Households, Taxable Income Over
0% $0 $0 $0
15% $44,625 $89,250 $59,750
20% $492,300 $553,850 $523,050

Source: Internal Revenue Service

Qualified Business Income Deduction (Sec. 199A)

The Tax Cuts and Jobs Act of 2017 (TCJA) includes a 20 percent deduction for pass-through businesses. Limits on the deduction begin phasing in for taxpayers with income above $182,100 (or $364,200 for joint filers) in 2023 (Table 7).

2023 Qualified Business Income Deduction Thresholds
Filing Status Threshold
Unmarried Individuals $182,100
Married Filing Jointly $364,200

Source: Internal Revenue Service

Annual Exclusion for Gifts

In 2023, the first $17,000 of gifts to any person are excluded from tax, up from $16,000. The exclusion is increased to $175,000 from $164,000 for gifts to spouses who are not citizens of the United States.

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A tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities.

Inflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power.

A tax bracket is the range of incomes taxed at given rates, which typically differ depending on filing status. In a progressive individual or corporate income tax system, rates rise as income increases. There are seven federal individual income tax brackets; the federal corporate income tax system is flat.

The standard deduction reduces a taxpayer’s taxable income by a set amount determined by the government. It was nearly doubled for all classes of filers by the 2017 Tax Cuts and Jobs Act as an incentive for taxpayers not to itemize deductions when filing their federal income taxes.

An individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S.

A capital gains tax is levied on the profit made from selling an asset and is often in addition to corporate income taxes, frequently resulting in double taxation. Capital gains taxes create a bias against saving, leading to a lower level of national income by encouraging present consumption over investment.

Bracket creep occurs when inflation pushes taxpayers into higher income tax brackets or reduces the value of credits, deductions, and exemptions. Bracket creep results in an increase in income taxes without an increase in real income. Many tax provisions—both at the federal and state level—are adjusted for inflation.

A tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly.

Taxable income is the amount of income subject to tax, after deductions and exemptions. For both individuals and corporations, taxable income differs from—and is less than—gross income.

The Alternative Minimum Tax (AMT) is a separate tax system that requires some taxpayers to calculate their tax liability twice—first, under ordinary income tax rules, then under the AMT—and pay whichever amount is highest. The AMT has fewer preferences and different exemptions and rates than the ordinary system.

The Earned Income Tax Credit (EITC) is a refundable tax credit targeted at low-income working families. The credit offsets tax liability, the total amount of tax debt owed by an individual, corporation, or other entity to a taxing authority like the Internal Revenue Service (IRS), and can even generate a refund, with earned income credit amounts calculated on the basis of income and number of children.