The IRS recently published the inflation adjustments for many tax-related figures for tax year 2023. These changes include:
- Standard Deduction: The 2023 standard deduction for married taxpayers filing jointly will be $27,700, an increase of $1,800 over 2022. Single filers and married people filing separately will get a standard deduction of $13,850 (a $900 increase), while the standard deduction for head-of-household filers will be $20,800 (a $1,400 increase).
- Earned Income Tax Credit (EITC): The maximum EITC for eligible taxpayers with three or more qualifying children will be $7,430 in 2023, up from $6,935 in 2022. The maximum credit amount will increase for other eligible taxpayers as well.
- Annual Gift Exclusion: The annual gift exclusion amount will increase to $17,000 per recipient, up from $16,000 in 2022.
- Foreign Earned Income Exclusion: The maximum amount of foreign earned income that eligible taxpayers may exclude from their gross income will be $120,000, up from $112,000 in 2022.
The income range for each tax bracket will rise in 2023 as well. A tax professional can help you determine how these changes may affect your tax situation.