The COVID-19 outbreak and the war in Ukraine have affected inflation rates, which means that there will be changes in the chained Consumer Price Index (CPI) numbers which will be used to calculate the inflation adjustment factor for the 2023 federal income tax brackets.
While the government is expected to announce those brackets in November, it has to be noted that the figures will be based on the monthly average of CPI changes for the latest fiscal year, which is between October 2021 and September 2022.
What could the inflation adjustment be for the 2023 tax year?
For the 2022 tax year, the inflation adjustment factor was just 3.1 percent, which means that for married joint-filing couples, the 24 percent rate bracket is 178,150 dollars compared to 172,750 dollars in 2021.
However, as inflation has been surging this year, Marketwatch.com has calculated that the inflation adjustment will be around seven percent for the 2023 tax year.
Meanwhile, Thomson Reuters Checkpoint has also calculated the 2023 tax brackets based on the August 2022 inflation rate. According to their calculations, for married individuals filing joint returns, the tax is 10 percent of the taxable income in the event it is under 22,000 dollars.
Meanwhile, in the event that the taxable income is over 22,000 dollars but less than 89,450 dollars. the tax is 2,200 dollars plus 12 percent of the amount over 22,000 dollars.
As for single individuals and marrieds filing separate returns, the tax is 10 percent if the income is not over 11,000 dollars but if it’s over the aforementioned figure and less than 44,725 dollars, the tax is 1,100 dollars plus an additional 12 percent of the amount over 11,000 dollars.
Tax for Heads of household with income lower than 15,700 dollars is 10 percent, while for those with income lower than 59,850 dollars, it is 1,570 dollars plus 12 percent of the amount over 15,700 dollars.