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IRS Responds to Inflation, Increases 2023 Standard Deduction

IRS Responds to Inflation, Increases 2023 Standard Deduction

In response to the nation's historically high inflation rates, the Internal Revenue Service (IRS) has increased the standard deduction for American taxpayers in 2023.

It is worth noting that the IRS makes adjustments to the tax code on an annual basis, but this particular move could mean savings for American households of all income levels. 

In an official release, the IRS shared specifics regarding the new standard deduction rules:

The standard deduction for married couples filing jointly for tax year 2023 rises to $27,700 up $1,800 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $13,850 for 2023, up $900, and for heads of households, the standard deduction will be $20,800 for tax year 2023, up $1,400 from the amount for tax year 2022.

The tax agency also noted that the top tax rate will remain 37% for single filers with incomes greater than $578,125 and $693,750 for married couples filing jointly.

Several items that were indexed for inflation in the past have not been adjusted for 2023. The IRS shared that the personal exemption will remain at 0, as it was for 2022. The elimination of the personal exemption was part of the Trump-era 2017 Tax Cuts and Jobs Act.

Additionally, as part of another provision in the Tax Cuts and Jobs Act, there will continue to be no limit on itemized deductions. This also held true in 2022, 2021, 2020, 2019, and 2018.

Recently, the IRS has been undergoing a major revamp, thanks in large part to an

$80 billion funding boon that was part of President Biden's Inflation Reduction Act. 

Last month, Treasury Secretary Janet Yellen visited the IRS's New Carrollton Center in Prince George's County, Maryland, where she praised the modernization team's efforts, saying, "This is widely recognized as one of the most complex modernization efforts in all of government. And your team completed it more than a month ahead of schedule."

She concluded her comments by telling the team, "So thank you. I will do whatever I can to support you. And today, like every day, I am proud to be your colleague."

What do you think about the IRS changing the standard deduction for taxpayers in 2023?

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Rebekah Barton

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