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Volume XIII, Number 35

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IRS Releases 2023 Annual Inflation Adjustments

On October 18, 2022, the Internal Revenue Service (IRS) announced the annual inflation adjustments for 2023 related to more than 60 tax provisions, with some increasing, some maintaining and some new additions to the list. The tax adjustments generally apply to tax returns for the 2023 tax year that will be filed in 2024 (i.e., the adjustment will not apply to tax returns filed next year for the 2022 tax year). The highlights are summarized below, but you can find the complete list detailed in Revenue Procedure 2022-38.

2023 Marginal Income Tax Brackets

Tax Rate Single Taxpayers,
Income Greater Than:
Married Couples Filing Jointly, Income Greater Than:
37% $578,125 $693,750
35% $231,250 $462,500
32% $182,100 $364,200
24% $95,375 $190,750
22% $44,725 $89,450
12% $11,000 $22,000
10% $11,000 or less $22,000 or less

 

2023 Standard Deduction

Married couples filing jointly $27,700 (increase of $1,800)
Single taxpayers and married individuals filing separately $13,850 (increase of $900)
Heads of households $20,800 (increase of $1,400)

 

Alternative Minimum Tax Exemption

  • Unmarried individuals: $81,300

  • Joint returns or surviving spouses: $126,500

  • Married individuals filing separately: $63,250

  • Estates and Trusts: $28,400

Earned Income Tax Credit

  • $3,995 for one qualifying child

  • $6,604 for two qualifying children

  • $7,430 for three or more qualifying children

Qualified Transportation Fringe Benefit

  • $300

Foreign Earned Income Exclusion

  • $120,000

Basic Exclusion Amount for Estates of Decedents

  • $12,920,000

Annual Exclusion for Gifts

  • $17,000

New for 2023: Energy-Efficient Commercial Building Deduction

  • The applicable dollar value used to determine the maximum allowance of the deduction is $0.54 (increased by $0.02), but not above $1.07, for each percentage point by which the total annual energy and power costs for the building are certified to be reduced by a percentage greater than 25%.

  • The applicable dollar value used to determine the increased deduction amount for certain property is $2.68 (increased by $0.11), but not above $5.36, for each percentage point by which the total annual energy and power costs for the building are certified to be reduced by a percentage greater than 25%.

Items Not Changing

  • Personal exemption for the 2023 tax year remains at zero

  • No limit on itemized deductions (same as 2022, 2021, 2020, 2019 and 2018)

Practice Point: The above adjustments are a welcome development for taxpayers in the wake of inflation. However, it is important to note that any tax relief will not be immediate as the adjustments are for the 2023 tax year and will be reflected on tax returns filed in 2024.

© 2023 McDermott Will & EmeryNational Law Review, Volume XII, Number 294
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About this Author

Andrew R. Roberson tax attorney McDermott Will. Andy handles tax cases in Federal court, United States Tax Court
Partner

Andrew R. Roberson is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office.  Andy specializes in tax controversy and litigation matters, and has been involved in over 30 matters at all levels of the Federal court system, including the United States Tax Court, several US Courts of Appeal and the Supreme Court. 

Andy also represents clients, including participants in the CAP program, before the Internal Revenue Service Examination Division and Appeals Office, and has been successful in settling...

312-984-2732
Kevin Spencer, McDermott Will & Emery LLP , Tax Litigation Attorney
Partner

Kevin Spencer focuses his practice on tax controversy issues. Kevin represents clients in complicated tax disputes in court and before the Internal Revenue Service (IRS) at the IRS Appeals and Examination divisions.

 

In addition to his tax controversy practice, Kevin has broad experience advising clients on various tax issues, including tax accounting, employment and reasonable compensation, civil and criminal tax penalties, IRS procedures, reportable transactions and tax shelters, renewable energy, state and local tax, and private client matters. After earning his Master of...

202-756-8203
Associate

Sarah M. Raben focuses her practice on private client matters with particular experience in tax controversy. Prior to joining McDermott, she worked for the IRS Office of Chief Counsel.

During law school Sarah was active with the Mississippi Law Journal and involved in the Mississippi Innocence Project.

312-899-8476
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