TThe outbreak of COVID-19 and the war in Ukraine have affected inflation rates, which means there will be changes in the related consumer price index (CPI) values that will be used to calculate the inflation adjustment factor for federal income tax categories in 2023.
While the government is expected to announce these brackets in November, it should be noted that the figures will be based on average monthly CPI changes for the most recent fiscal year, which falls between October 2021 and September 2022.
What could be the inflation adjustment factor for the 2023 tax year?
In tax year 2022, the inflation adjustment factor was only 3.1 percent, meaning that for married couples filing a joint return, the 24 percent rate is $178,150, compared to $172,750 in 2021.
However, as inflation has soared this year, Marketwatch.com has estimated that the inflation adjustment will be around seven percent in tax year 2023.
Meanwhile, Checkpoint Thomson Reuters also calculated tax brackets for 2023 based on the inflation rate in August 2022. They calculate that for married individuals filing a joint return, the tax is 10 percent of taxable income if it is less than $22,000.
Meanwhile, in case the taxable income is more than $22,000 but less than $89,450. the tax is $2,200 plus 12 percent on amounts over $22,000.
For singles and couples filing separate returns, the tax is 10 percent if income does not exceed $11,000, but if it exceeds this figure and is less than $44,725, the tax is $1,100 plus an additional 12 percent on the amount above . $11,000.
The tax for heads of households with incomes less than $15,700 is 10 percent, and those with incomes less than $59,850 are taxed at $1,570 plus 12 percent on amounts over $15,700.