My other post listed 2022 2023 401k and IRA contribution and income limits. I also calculated the inflation-adjusted tax brackets and some of the most commonly used numbers in tax planning for 2023 using the published inflation numbers and the same formula prescribed in the tax law. The official numbers announced by the IRS confirmed my calculations.
2022 2023 Standard Deduction
You don’t pay federal income tax on every dollar of your income. You deduct an amount from your income before you calculate taxes. About 90% of all taxpayers take the standard deduction. The other ~10% itemize deductions when their total deductions exceed the standard deduction. In other words, you’re deducting a larger amount than your allowed deductions when you take the standard deduction. Don’t feel bad about taking the standard deduction!
The basic standard deduction in 2022 and 2023 are:
| 2022 | 2023 | |
|---|---|---|
| Single or Married Filing Separately | $12,950 | $13,850 |
| Head of Household | $19,400 | $20,800 |
| Married Filing Jointly | $25,900 | $27,700 |
Source: IRS Rev. Proc. 2021-45, Rev. Proc. 2022-38.
People who are age 65 and over have a higher standard deduction than the basic standard deduction.
| 2022 | 2023 | |
|---|---|---|
| Single, age 65 and over | $14,700 | $15,700 |
| Head of Household, age 65 and over | $21,150 | $22,650 |
| Married Filing Jointly, one person age 65 and over | $27,300 | $29,200 |
| Married Filing Jointly, both age 65 and over | $28,700 | $30,700 |
Source: IRS Rev. Proc. 2021-45, Rev. Proc. 2022-38.
People who are blind have an additional standard deduction.
| 2022 | 2023 | |
|---|---|---|
| Single or Head of Household, blind | +$1,750 | +$1,850 |
| Married Filing Jointly, one person is blind | +$1,400 | +$1,500 |
| Married Filing Jointly, both are blind | +$2,800 | +$3,000 |
Source: IRS Rev. Proc. 2021-45, Rev. Proc. 2022-38.
2022 2023 Tax Brackets
The tax brackets are based on taxable income, which is AGI minus various deductions. The tax brackets in 2022 are:
| Single | Head of Household | Married Filing Jointly | |
|---|---|---|---|
| 10% | $0 – $10,275 | $0 – $14,650 | $0 – $20,550 |
| 12% | $10,275- $41,775 | $14,650 – $55,900 | $20,550 – $83,550 |
| 22% | $41,775 – $89,075 | $55,900 – $89,050 | $83,550 – $178,150 |
| 24% | $89,075 – $170,050 | $89,050 – $170,050 | $178,150 – $340,100 |
| 32% | $170,050 – $215,950 | $170,050 – $215,950 | $340,100 – $431,900 |
| 35% | $215,950 – $539,900 | $215,950 – $539,900 | $431,900 – $647,850 |
| 37% | Over $539,900 | Over $539,900 | Over $647,850 |
Source: IRS Rev. Proc. 2021-45.
The 2023 tax brackets are:
| Single | Head of Household | Married Filing Jointly | |
|---|---|---|---|
| 10% | $0 – $11,000 | $0 – $15,700 | $0 – $22,000 |
| 12% | $11,000 – $44,725 | $15,700 – $59,850 | $22,000 – $89,450 |
| 22% | $44,725 – $95,375 | $59,850 – $95,350 | $89,450 – $190,750 |
| 24% | $95,375 – $182,100 | $95,350 – $182,100 | $190,750 – $364,200 |
| 32% | $182,100 – $231,250 | $182,100 – $231,250 | $364,200 – $462,500 |
| 35% | $231,250 – $578,125 | $231,250 – $578,100 | $462,500 – $693,750 |
| 37% | Over $578,125 | Over $578,100 | Over $693,750 |
Source: IRS Rev. Proc. 2022-38.
A common misconception is that when you get into a higher tax bracket, all your income is taxed at the higher rate, and you’re better off not having the extra income. That’s not true. Tax brackets work incrementally. If you’re $1,000 into the next tax bracket, only $1,000 is taxed at the higher rate. It doesn’t affect the income in the previous brackets.
For example, someone single with a $60,000 AGI in 2022 will pay:
| First 12,950 (the standard deduction) | 0% | ||
| Next $10,275 | 10% | ||
| Next $31,500 ($41,775 – $10,275) | 12% | ||
| Final $5,275 | 22% |
This person is in the 22% tax bracket but only less than 10% of the $60,000 AGI is really taxed at 22%. The bulk of the income is taxed at 0%, 10%, and 12%. The blended tax rate is only 9.9%. If this person doesn’t earn the final $5,275, he or she is in the 12% bracket instead of the 22% bracket, but the blended tax rate only goes down slightly from 9.9% to 8.8%. Making the extra income doesn’t cost this person more in taxes than the extra income.
Don’t be afraid of going into the next tax bracket.
2022 2023 Capital Gains Tax
When your other taxable income (after deductions) plus your qualified dividends and long-term capital gains are below a cutoff, you will pay 0% federal income tax on your qualified dividends and long-term capital gains under this cutoff.
This is illustrated by the chart below. Taxable income is the part above the black line, after subtracting deductions. A portion of the qualified dividends and long-term capital gains is taxed at 0% when the other taxable income plus these qualified dividends and long-term capital gains are under the red line.
The red line is close to the top of the 12% tax bracket but they don’t line up exactly.
| 2022 | 2023 | |
|---|---|---|
| Single or Married Filing Separately | $41,675 | $44,625 |
| Head of Household | $55,800 | $59,750 |
| Married Filing Jointly | $83,350 | $89,250 |
Source: IRS Rev. Proc. 2021-45, Rev. Proc. 2022-38.
For example, suppose a married couple filing jointly has $70,000 in other taxable income (after deductions) and $20,000 in qualified dividends and long-term capital gains in 2022. The maximum zero rate amount cutoff is $83,350. $13,350 of the qualified dividends and long-term capital gains ($83,350 – $70,000) is taxed at 0%. The remaining $20,000 – $13,350 = $6,650 is taxed at 15%.
A similar threshold exists on the upper end for qualified dividends and long-term capital gains. When your other taxable income (after deductions) plus your qualified dividends and long-term capital gains are above a cutoff, you will pay 20% federal income tax instead of 15% on your qualified dividends and long-term capital gains above this cutoff.
| 2022 | 2023 | |
|---|---|---|
| Single | $459,750 | $492,300 |
| Head of Household | $488,500 | $523,050 |
| Married Filing Jointly | $517,200 | $553,850 |
| Married Filing Separately | $258,600 | $276,900 |
Source: IRS Rev. Proc. 2021-45, Rev. Proc. 2022-38.
2022 2023 Estate and Trust Tax Brackets
Estates and trusts have different tax brackets than individuals. These apply to non-grantor trusts and estates that retain income as opposed to distributing the income to beneficiaries. Grantor trusts (including the most common revocable living trusts) don’t pay taxes separately. The income of a grantor trust is taxed to the grantor at the grantor’s tax brackets.
Here are the tax brackets for estates and trusts in 2022 and 2023:
| 2022 | 2023 | |
|---|---|---|
| 10% | $0 – $2,750 | $0 – $2,900 |
| 24% | $2,750 – $9,850 | $2,900 – $10,550 |
| 35% | $9,850 – $13,450 | $10,550 – $14,450 |
| 37% | over $13,450 | over $14,450 |
Source: IRS Rev. Proc. 2021-45, Rev. Proc. 2022-38.
2022 2023 Gift Tax Exclusion
Each person can give another person up to a set amount in a calendar year without having to file a gift tax form. Not that filing a gift tax form is onerous, but many people avoid it if they can. In 2023, this gift tax exclusion amount will likely increase from $16,000 to $17,000.
| 2022 | 2023 | |
|---|---|---|
| Gift Tax Exclusion | $16,000 | $17,000 |
Source: IRS Rev. Proc. 2021-45, Rev. Proc. 2022-38.
The gift tax exclusion is counted by each giver to each recipient. As a giver, you can give up to $16,000 each in 2022 to an unlimited number of people without having to file a gift tax form. If you give $16,000 to each of your 10 grandkids in 2022 for a total of $160,000, you still won’t be required to file a gift tax form. Any recipient can also receive a gift from an unlimited number of people. If a grandchild receives $16,000 from each of his or her four grandparents in 2022, no taxes or tax forms will be required.
2022 2023 Savings Bonds Tax-Free Redemption for College Expenses
If you cash out U.S. Savings Bonds (Series I or Series EE) for college expenses or transfer to a 529 plan, your modified adjusted gross income must be under certain limits to get a tax exemption on the interest. See Cash Out I Bonds Tax Free For College Expenses Or 529 Plan. Here are the income limits in 2022 and 2023:
| 2022 | 2023 | |
|---|---|---|
| Single, Head of Household | $85,800 – $100,800 | $91,850 – $106,850 |
| Married Filing Jointly | $128,650 – $158,650 | $137,800 – $167,800 |
Source: IRS Rev. Proc. 2021-45, Rev. Proc. 2022-38.
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David Folts says
Thanks Harry: Your work is always spot on!
Kathryn S says
Agree with David. I’ve subscribed to your blog for years. Always informative, never annoying, and the projections spot on!
Linda says
This is very helpful- thank you. Would you be able to provide a detailed example of how the qualified income and long term capital gains tax works?
Thanks for all your work!
Harry Sit says
I added some explanation and an example in the 0% capital gains section.
Ed says
Is there an age adjustment that should have been added to the standard deduction table?
Harry Sit says
As noted, people who are age 65 and over or blind have a higher standard deduction. I added two more tables.
JS says
Biden added another tier of long-term capital gains tax at the 25% rate. No mention of this in the article??
Harry Sit says
Biden didn’t. Neither branch of the legislature passed anything with a 25% capital gains rate yet.
bob nisbet says
What is the standard deduction addition for those 65 and older for 2022?
Also, in the Capital Gains Tax section, taxable income is after subtracting the standard deduction isn’t it?
Thanks.
Harry Sit says
I added a table for age 65 and older. Taxable income is after all deductions.
Sharon Pichai says
I second Kathryn S’s comment and Linda’s request!
Arun says
Harry, Thanks. This is a good reminder! I use TurboTax, but since I use it once every year, I stumble along to find my way around it!
As the markets have surged, I am planning to rebalance my portfolio.
Do you recommend an easier calculator to predict the impact of rebalancing trades in taxable account? Thanks.
Orville R Forbes says
Let me tell you something, whenever I get these emails that there is a new “Research Document” (huge smiley face) I read every word and even if I already know the information your way of outlining and contextualizing makes it seems as if it’s the first time I’m reading it.
Another great one down, waiting patiently for the next.
Harry Sit says
The IRS announced the official numbers this morning. My calculations matched the official numbers 100%.
Eloise says
great info! You answered my question to the T without having to go through so many hoops. Thanks Harry!
Mapleton Reader says
I’m confused. Both CPI-W, CPU-U and Chained CPI-U were up by 5+% this year. Where did the lower 3.1% increase for tax brackets come from?
Harry Sit says
The 5%+ is from one month over the same month a year ago. The tax brackets use a 12-month average. When inflation accelerates, the year-over-year change in one month will be higher than the change in the 12-month average. The average will catch up when it stabilizes.
Stephen Ray says
Thank you for the example of how the 0% rate works with long term capital gains. I was not understanding how to relate ordinary income to the $83,350 (MFJ) limit and then how to anticipate the amount of taxes owed on amounts above that level.
Chrica says
Harry, you are the greatest!
Can you please simplify qualified dividends and capital gains worksheet?
For a single person 30,000 qualified dividends and 20,000 capitalgains.
Long term capital loss carryover 60,000
Taxable income 85,000
How much tax will be on qualified dividends?
Thank you.
Harry Sit says
The capital gains are absorbed by the capital loss carryover. $55,000 taxable income before qualified dividends is already above the $41,675 threshold for single. 100% of the qualified dividends will be taxed at 15%. 15% on $30,000 equals $4,500.
Steve M says
Thank you, very helpful!
Orville F. says
Another homerun. Thank you.
Harry, whenever you come Orlando for vacation we need to sit and have few of those cocktails in carved out pineapples with umbrellas.
O.F.
Jason says
We are getting fairly close to the expiration of the Trump tax cuts (the TCJA.) Unless Congress extends them in 2024, 2025 might be a truly chaotic tax year.
Stephe says
Yes, they expire in only 3 years, 5.5 months, unless they make tax law changes after the start of the calendar year.
Steve M says
Someone’s bad at math! They expire in 2 and a half years, not 3 and a half.
Nate says
Harry, you provide a valuable resource in calculating and posting these types of posts. Thank you and please don’t ever stop!
Gary says
Super useful material! Thanks! I read the comments under your IRMAA Brackets posting, and can now duplicate the procedures. Very helpful for my personal financial models. Can you direct me to a similar procedure description for things like tax brackets, standard dictions, etc?
I have tried doing google searches for this in the past and always fail. Everyone wants to tell you the published results, but no one share how the IRS does it. I would even be happy to read the tax law that describes it. 😀😀
Mapleton Reader says
The only detailed explanation I’ve found is “https://www.govinfo.gov/content/pkg/USCODE-2020-title26/html/USCODE-2020-title26-subtitleA-chap1-subchapA-partI-sec1.htm”. It is quite convoluted, you will need to read most of subpart (f) to get an idea of what the IRS is doing.
The IRS now uses the Chained CPI-U data, for which the last 12 or so values are only interim or initial results, subject to revision in future months. This means that “when” you collect the C-CPI-U data for your calculation may matter in the final results (and may differ from the IRS published data). For example, if you download the values available today (Aug 2022) for back calculating the 2021 tax tables, you will be off somewhat from IRS values (because now only the finalized C-CPI-U monthly values of 2020 and 2021 are available (from the http://www.BLS.gov) and not the interim values that the IRS had to use when they calculated and published the 2021 tax tables).
Gsry says
Thank you Mapleton Reader! I had found the same detailed explanation and was not sure if I was interpreting the procedures correctly. I was close, but could not duplicate the brackets. Your observation on the interim Chained CPI-U indices, could easily be the difference. It even explains why I could not duplicate Harry’s current projections, as I am using the latest indices. I will try again when Harry does next update. Thanks again!
WeLuvHarry says
Very helpful info! Any chance of adding the 20% Capital Gain bracket estimate?
Harry Sit says
I added estimates for the 20% capital gains brackets.
Layzed says
Harry, I’ve also had a problem exactly duplicating the IRS 2022 (Married/Joint) tax brackets – I can get close but not spot on. Is the ‘Mapleton Reader’ correct about the IRS using interim values for C-CPI-U index to calculate and release their 2022 tax brackets on 10-Nov-2021 last year?
Harry Sit says
The chained CPIs are subject to several rounds of revisions. The IRS could only use the latest values available at the time when they calculated the brackets. Waiting for the final revision would be too late. The Chained CPI values you see now have been revised after the IRS published the brackets.
Gary says
Assuming we are correct that the C-CPI-U interim values make it difficult to duplicate previous Bracket amounts, is there an existing database that displays the historical index values over time? I have tried searching, but only seem to get the latest snapshots.
Also, it would be very helpful if someone could publish an example using actual index values to promulgate a bracket value (including the all important rounding steps). Even for IRMAA that uses CPI-U (no interim values here), I end up with small differences in my projections.
Layzed says
In another forum (Bogleheads.org), I do have the actual index values to get my attempt to derive 2022 (Married/Joint) tax brackets:
“This may be off topic, but can anyone please tell me how to use the “IRC of 1986” as updated by TCJA (given say by https://www.law.cornell.edu/uscode/text/26/1) to calculate the new tax brackets for 2022? I’ve gotten the 2022 info from the IRS (e.g. brackets, Married/Joint, 10% [up to $20,550] 12% [up to $83,550] 22% [up to $178,150] etc), and I can almost but not quite get these bracket amounts by my own calculations. Pointing out what I’ve missed would be greatly appreciated.
(1) Starting with the 2018 rates (brackets, Married/Joint, 10% [up to $19,050] 12% [up to $77,400] 22% [up to $165,000])
(2) IRC code section (1)(f)(3)(A)(i): C-CPI-U for preceding calendar year (2021) = 149.0635
(3) code section (1)(f)(3)(A)(ii) as amended by TCJA: CPI(-U) for calendar year 2017 = 243.3918 , multiplied by amount determined in subparagraph (B)
(4) code section (1)(f)(3)(B) multiplying amount determined by C-CPI-U for 2016 divided by CPI(-U) for 2016
so (3) and (4) give: 138.6957 (= 243.3918 * 135.9930 / 238.6490)
which gives an inflation adjustment factor of 1.074752 (= 149.0635 / 138.6957)
so I should have 2022 tax bracket amounts (multiplying inflation adjustment factor by 2018 tax brackets) of
10% [up to $20,474] 12% [up to $83,186] 22% [up to $177,334]
which, doesn’t match with the info from the IRS about 2022 [even applying rounding down to the nearest $50 ala section (1)(f)(7)]. It helps, but not enough, if I broadly interpret the TCJA amendment [regarding use of the year 2017 to also apply to section (1)(f)(3)(B) C-CPI-U and CPI(-U)] which would result in
10% [up to $20,542] 12% [up to $83,462] and 22% [up to $177,923]
Anybody knows where I am going wrong?”
Harry Sit says
When you want the numbers early for planning purposes, you don’t have to be precise. Unlike IRMAA, being off by $50 here or $100 there doesn’t make much difference. I didn’t check your method but both $20,474 and $20,542 are within $100 of the official number. That’s more than sufficient for planning. You can apply the same method to calculate 2023. If you come close to my numbers here, that’s good enough. Let’s not worry about a $50 or $100 difference here or there. We’ll see the official numbers by late October or early November. Until then, you can use my numbers or yours. I can’t think of any planning scenario that depends on a level of precision down to $50 or $100.
Scot Dahl says
The TCJA gave us new tax brackets for 2017 so the inflation adjustment for these brackets will only use the C-CPI-U (chained CPI). So the 10% MFJ bracket for 2022 would be calculated:
$19,050 * 149.2708 / 138.2368 = $20,570.56 (rounded down to $20,550)
where: $19,050 is the base value for the 10% MFJ bracket for 2018 from the TCJA, 149.2708 is the 12 month (Sep 2020 – Aug 2021) C-CPI-U average as of the Aug 2021 data release, and 138.2368 is the 12 month average of the final C-CPI-U values for the months Sep 2016 – Aug 2017.
Layzed says
Harry, I agree about being off by $50-$100 is close enough for planning purposes (although I’m off in the 22% bracket by $850 [$178,150 vs $177,300] or 0.48% ). It is more an issue that I’m really not sure I’m interpreting things (about 1986 IRC amended by TCJA) correctly and not leaving something off. Thanks though for the responses.
Gary says
Lazyed, I had read the tax law too. Realized that the 2016 C-CPI-U index also would have operated with the original Interim values (which I cannot find anywhere) and not the currently published values for 2016 (which appears to be what you used). Perhaps that explains the issue?
Layzed says
Gary, yes my best attempt at duplicating the IRS tax brackets for 2022 did use the 2016 (final) values for C-CPI-U and CPI(-U) [in the IRC of 1986 amended by TCJA]. But I am interpreting the ‘Mapleton Reader’ post of Aug-15 to suggest that the IRS used ‘interim values’ (as of the date of the IRS calculation) of C-CPI-U only for 2021 (i.e. 1-Sep-2020 through 31-Aug-2021). This seems confirmed by the ‘Harry Sit’ post of 25-Aug. I am assuming that the IRS used the (final) 2016 values of C-CPI-U though – seems reasonable for the IRS to use the ‘most current values as of the date of the calculation’ for their tax bracket updates.
If this is correct, then for the upcoming 2023 tax brackets, I wouldn’t need a whole history of interim values (back through 2016) but instead just the interim values through Oct/Nov of this year.
Jim Morris says
Love your projections Harry. They are very handy for my tax planning. Have you updated what the income levels for the tax brackets would be if the provisions of the tax law changes from 2017 revert to the 2017 rates in 2026? Or can you point me to another forum on-line where I might find this information?
Harry Sit says
I’m not going that far. It’s impossible to know what inflation will be and how Congress will change the laws. Just doing the next year is difficult enough for me. I don’t know where you can find projections out to 2026.
GeezerGeek says
Harry,
Great Information! Thanks!
I had been getting early estimates for next year’s brackets and deductions from the Bloomberg site, https://pro.bloombergtax.com. I downloaded this year’s estimates from them and the amounts of the deductions and brackets are identical to yours.
Of course, as you know and have written about in other articles in this blog, the 3.8% Net Investment Income tax makes the calculation of the total tax on capital gains a bit more convoluted since it uses a different threshold (modified adjusted gross income) than the standard capital gains tax. The net effect of that additional tax means that anyone in the 20% capital gains bracket actually pays 23.8% in taxes on that capital gain and some folks in the 15% bracket actually pay 18.8% in taxes.
Thanks again for this timely and valuable information.
Harry Sit says
Next time you won’t have to go to Bloomberg. 🙂 The 3.8% NIIT only applies to the amount above the $200k/$250k MAGI threshold, not the entire capital gains. If you have $50k in long-term capital gains, you may not pay the extra 3.8% NIIT at all, or you pay it on only $10k, or you may pay it on the full $50k. It just depends on where your MAGI sits.
Scot Dahl says
Are you sure that your maximum 15% capital gains rate amount for married filing separately ($276,925) is correct? IRC 1(f)(5)(B)(i)(III) states that maximum 0% amount for MFS is “equal to ½ of the amount in effect for the taxable year under subclause (I)” – which is the MFJ amount. However it does not use that same “in effect” language for the MFS maximum 15% amount. As I read section 1(f)(5)(C)(ii), the MFS maximum 15% amount should be rounded down to the nearest $50 which would make the value, $276,900.
Harry Sit says
I’m not too worried about a difference of $25. See reply to comment #22. The difference in paying 15% or 20% on $25 is only $1.25. That said, if you look at the Schedule D instructions for 2019, you’ll see that number for MFS in that year wasn’t a multiple of $50, which disproves your theory.
Scot Dahl says
Not the first time I have misinterpreted the tax code and doubtless will not be the last. I agree that for tax planning a $25 difference does not matter.
Harry Sit says
The official numbers came out in Rev. Proc. 2022-38. The starting point for 20% capital gains rate for married filing separately is $276,900, not $276,925. I’m not sure what changed since 2019 but I’ll use your method next year.
RT says
Could you please include trust tax rate as well
GeezerGeek says
RT,
I got these amounts from Bloomberg site, https://pro.bloombergtax.com. This is a two column table but I don’t think it will format well when I paste it in this comment so I put an * to indicate the start of the second column.
If Taxable Income Is: *The Tax Is:
Not Over $2,900 *10% of the taxable income
Over $2,900 but not over $10,550 *$290 plus 24% of excess over $2,900
Over $10,550 but not over $14,450 *$2,126 plus 35% of excess over $10,550
Over $14,450 *$3,491 plus 37% of excess over $14,450
Harry Sit says
Confirmed and added to the post.
Mighty Investor says
Thanks, Harry. 🙏
Fred Black says
Should I assume the NIIT thresholds remain unchanged like they have been since its inception? Any idea why these thresholds have not increased?
Harry Sit says
They’re fixed by law. No inflation adjustments.
Scott says
I didn’t see any mention of how the top of the 0% CG rate has changed. It’s now 89,250 for married filing jointly. It’s close to the top of the 12% bracket but not exactly. For some reason, Congress made the cutoff for 0% CG a little bit less.
Harry Sit says
It’s in the Capital Gains Tax section with an illustration.
Anita says
Can you list the brackets for the ACA? I always have a difficult time finding the actual $ numbers for the ACA. Specifically, what is the total income I must stay under, married, filling jointly, to avoid having to pay back the entire premium paid by the government?
Harry Sit says
There used to be a hard stop at 400% of the Federal Poverty Level. It’s suspended through 2025. See ACA Premium Subsidy Cliff Turns Into a Slope Through 2025.