The IRS Announces Tax Inflation Adjustments for 2023

While these changes won’t affect how you file in April, they may affect your financial decisions in 2023. Here are a few of the biggest changes:

• Standard Deduction: The 2023 standard deduction for married taxpayers filing jointly will be $27,700, an increase of $1,800 over 2022. Single filers and married people filing separately will get a standard deduction of $13,850 (a $900 increase), while the standard deduction for head-of-household filers will be $20,800 (a $1,400 increase).
• Earned Income Tax Credit (EITC): The maximum EITC for eligible taxpayers with three or more qualifying children will be $7,430 in 2023, up from $6,935 in 2022. The maximum credit amount will increase for other eligible taxpayers as well.
• Annual Gift Exclusion: The annual gift exclusion amount will increase to $17,000 per recipient, up from $16,000 in 2022.
• Foreign Earned Income Exclusion: The maximum amount of foreign earned income that eligible taxpayers may exclude from their gross income will be $120,000, up from $112,000 in 2022.
• The new IRS limit for FSA contributions for 2023 is $3,050, an increase of 7% from 2022’s threshold of $2,850.

As always, we highly recommend that you call our firm before implementing any tax planning technique or have any questions on how any of the strategies discussed here.