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You can
keep
more
money
from the
IRS next
year,
thanks
to
inflation
By Jacob
Bogage
washingtonpost.com
WASHINGTON
- The
Internal
Revenue
Service
will
allow
Americans
to
shield
more of
their
income
from
taxes in
2023
because
of
higher
inflation,
the
agency
announced
Tuesday,
raising
income
thresholds
for all
tax
brackets
and
increasing
the
standard
deduction.
The top
tax rate
of 37
percent
will
apply to
individuals
with
income
exceeding
$578,125
and
married
couples
filing
jointly
with
income
more
than
$693,750.
Both of
those
amounts
are up 7
percent
from
2022 to
track
with
increases
in the
consumer
price
index.
The
standard
deduction
— the
baseline
amount
of
income
that
filers
can
collect
tax free
— will
increase
to
$13,850
for
individuals
and
$27,700
for
married
couples.
It is
the
largest
adjustment
to
deductions
since
1985,
when the
IRS
began
annual
automatic
inflationary
adjustments.
Certain
parts of
the tax
code are
tied to
inflation
to
prevent
rising
prices
from
causing
higher
taxes.
Taxpayers
will see
the new
figures
reflected
in
withholding
statements
on
paychecks
beginning
in
January,
with
workers
securing
more
take-home
pay.
The tax
system
changes
follow a
large
cost of
living
adjustment,
or COLA,
announced
by the
Social
Security
Administration
last
week to
compensate
for
inflation.
Social
Security
benefits
are set
to jump
8.7
percent
in 2023,
the
greatest
such
increase
in four
decades.
Several
other
elements
of the
tax code
also are
indexed
to
inflation.
The
maximum
2023
Earned
Income
Tax
Credit,
one of
the
federal
government’s
main
anti-poverty
measures,
will be
$7,430,
up from
$6,935
in 2022.
The
annual
gift tax
exclusion
— the
maximum
amount
one
person
can give
another
without
incurring
a tax
penalty
— will
rise to
$17,000
from
$16,000.
The
estate
tax
threshold,
often
used by
the
wealthiest
Americans
to
shield
inherited
assets
from
levies,
will
jump to
$12.9
million
from
$12.1
million.
The IRS
will
also
allow
parents
adopting
a child
to
shield
$15,950
per
child
from
taxes,
up from
$14,890
in 2022.
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