Inflation has driven up the price of virtually everything, from rent and electricity to groceries and clothing. On the bright side, that inflation has also resulted in a bump in standard deductions on 2023 tax returns.
On October 18, the Internal Revenue Service (IRS) announced that inflation has led to adjustments on more than 60 tax provisions.
The standard deduction for married couples filing jointly will increase by $1,800 in 2023, to $27,700. Single taxpayers and married individuals filing separately can expect to see their standard deduction rise by $900 next year, to $13,850. Heads of households will see their standard deduction rise by $1,400 in 2023, to $20,800.
Along with the changes to the standard deduction rates, the IRS also raised the federal income tax brackets, basically meaning that less of taxpayers' yearly income will be taxable.
There were also increases to the alternative minimum tax for higher earners to $81,300 from $75,900, and the estate tax exemption for wealthy families rose from $12,060,000 in 2022 to $12,920,000 in 2023. Filers can also exclude gifts totaling up to $17,000 in 2023, up from $16,000 in 2022.
Low- to moderate-income filers will also be able to write off an increased maximum of $7,430, and employees can put $3,050 towards their health flexible spending accounts.
The IRS hasn't yet released information regarding any adjustments to 401(k) or individual retirement account limits, but those figures are also expected to rise.
So far this year, rent in the United States has risen 7.2%, electricity is up 15.5%, groceries have risen 13%, and the cost of health insurance has risen by a whopping 30%, according to data from the Bureau of Labor Statistics.