IRS Inflation Changes
The IRS adjusts tax brackets every year. This is an effort to stop “bracket creep” which is when inflation pushes taxpayers into a higher income tax bracket even though they didn’t get a real increase in spending power.
In addition to adjusting tax brackets, income limits have shifted. For example, if your taxable income was $90,000 in 2022, your tax rate was 24 percent. In 2023, it drops to 22 percent.
Other changes the IRS made for 2023 consist of the following:
- Contribution limits for 401(k) and related retirement plans increased to $22,500, up $2,000 over 2022.
- The 2023 standard deduction for married couples filing jointly increased to $27,000 – a $1,800 increase over 2022.
- The standard mileage rate for 2023 is 65.5 cents per mile.