2023 Tax Brackets, Standard Deduction, and Other Changes

The IRS recently published the annual inflation updates for 2023. If you have questions about a particular amount that I do not mention here, you can likely find it in the official IRS announcements:

• Rev. Proc. 2022-38 contains most inflation adjustment figures,
• Notice 2022-55 contains figures relating to retirement accounts, and
• Rev. Proc. 2022-24 contains figures relating to health savings accounts (HSAs).

Single 2023 Tax Brackets

Married Filing Jointly 2023 Tax Brackets

Head of Household 2023 Tax Brackets

Married Filing Separately 2023 Tax Brackets

Standard Deduction Amounts

The 2023 standard deduction amounts are as follows:

• Single or married filing separately: $13,850
• Married filing jointly: $27,700
• Head of household: $20,800

The additional standard deduction for people who have reached age 65 (or who are blind) is $1,500 for each married taxpayer or $1,850 for unmarried taxpayers.

IRA Contribution Limits

The contribution limit for Roth IRA and traditional IRA accounts is increased to $6,500.

The catch-up contribution limit for people age 50 or over does not get inflation adjustments and therefore is still $1,000. (Update: As a result of the SECURE Act 2.0, the IRA catch-up contribution limit will begin to get inflation adjustments starting in 2024.)

401(k), 403(b), 457(b) Contribution Limits

The salary deferral limit for 401(k) and other similar plans is increased to $22,500.

The catch-up contribution limit for 401(k) and other similar plans for people age 50 and over is increased to $7,500.

The maximum possible contribution for defined contribution plans (e.g., for a self-employed person with a sufficiently high income contributing to a solo 401(k)) is increased to $66,000.

Health Savings Account Contribution Limits

For 2023, the maximum HSA contribution for somebody with self-only coverage under a high deductible health plan is $3,850. The limit for somebody with family coverage under such a plan is $7,750.

The HSA catch-up contribution limit for people age 55 and over is not inflation adjusted, so it remains at $1,000.

Capital Gains and Qualified Dividends

For 2023, long-term capital gains and qualified dividends face the following tax rates:

• 0% tax rate if they fall below $89,250 of taxable income if married filing jointly, $59,750 if head of household, or $44,625 if filing as single or married filing separately.
• 15% tax rate if they fall above the 0% threshold but below $553,850 if married filing jointly, $523,050 if head of household, $492,300 if single, or $276,900 if married filing separately.
• 20% tax rate if they fall above the 15% threshold.

Alternative Minimum Tax (AMT)

The AMT exemption amount is increased to:

• $81,300 for single people and people filing as head of household,
• $126,500 for married people filing jointly, and
• $63,250 for married people filing separately.

Annual Gift Tax Exclusion

For 2023 the annual exclusion for gifts will be $17,000.

Estate Tax

The estate tax exclusion is increased to $12,920,000 per decedent.

Pass-Through Business Income

With respect to the 20% deduction for qualified pass-through income, for 2023, the threshold amount at which the “specified service trade or business” phaseout and the wage (or wage+property) limitations begin to kick in will be $364,200 for married taxpayers filing jointly and $182,100 for single taxpayers, people filing as head of household, and for married people filing separately.