Your income tax rate paid varies based on your level of income. Those in higher income tax brackets pay a larger share of their income in taxes. To account for rising prices in the United States, the Internal Revenue Service raised tax bracket thresholds for the next tax year, 2023. As a result, many Americans will see a bump in their take-home pay due to decreased taxes on high incomes.
The New Tax Rate Structure
The IRS announcement of higher federal income tax rates and standard deductions will assist Americans with living expenses by providing opportunities to reduce taxable income.
In addition to IRA and high-income tax bracket adjustments, the IRS provided reductions in estate taxes for affluent families. Income tax rates are modified by changes to tax brackets established by the Internal Revenue Service. The new tax brackets start at 10% and increase to 37% on January 1, 2023.
- The 10% tax rate applies to the taxable income of $11,000 or less for single filers and $22,000 or less for married partners filing jointly.
- The 12% tax rate applies to individuals with income between $11,000 and $44,725 and a married couples’ income between $22,000 and $89,450.
- The 22% tax rate applies to individuals with income between $44,726 and $95,375 and $89,451 and $190,750 for those filing jointly.
- The 24% tax bracket applies to individuals with income between $95,376–$182,100; married couples with income between $190,751–$364,200.
- The 32% tax bracket applies to individuals making between $182,101 and $231,250 and married couples making between $364,201 and $462,500.
- The 35% tax bracket applies to individuals making between between $231,251 and $578,125 and for married couples making between $462,501 and $693,750.
- Finally, a 37% tax rate will apply to individuals making $578,126 or more and $693,751 for those married, filing jointly.
Deductions Standards for 2023
Taxpayers have the option of taking the standard deduction. The IRS has raised the standard deduction for single filers to $13,850 in 2023 and the standard deduction for those married filing jointly to $27,700.
These deductions will ensure that low-income families who have had to deal with the rising cost of living will pay taxes over a certain pay threshold.
Considering the change in your income tax bracket, the Internal Revenue Service recommends reviewing your tax withholding to maximize your take-home pay. The Internal Revenue Service has reported that most individuals are withholding too much. It is possible to increase your monthly salary using the IRS Tax Withholding Estimator to determine the correct amount to withhold for income tax.