No, the new federal income tax brackets do not apply to your 2023 return

The Internal Revenue Service announced on Nov. 9 that it has adjusted federal income tax brackets, which happens every year to account for inflation.

A tax bracket refers to a range of incomes subject to a certain income tax rate. The tax rates progressively increase as a person’s income grows. 

The IRS announcement led some people online to wonder whether the new federal income tax brackets apply to taxpayers’ 2023 returns. 

THE QUESTION

Do the new federal income tax brackets apply to taxpayers’ 2023 returns?

THE SOURCES

• The Internal Revenue Service (IRS)
• Tax Foundation
• Mark Luscombe, CPA, an attorney and principal analyst for the tax and accounting group at Wolters Kluwer
• Tom Wheelwright, CPA, founder and CEO of WealthAbility

THE ANSWER

No, the new federal income tax brackets do not apply to taxpayers’ 2023 returns.

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WHAT WE FOUND

The new federal income tax brackets will not apply to taxpayers’ 2023 returns that they will file in early 2024.

Instead, the new adjustments are for tax year 2024 and those returns are filed in 2025, the Tax Foundation and Mark Luscombe, a tax and accounting expert at Wolters Kluwer, say. The IRS announced federal income tax brackets for tax year 2023 in October 2022. 

Here are the seven tax brackets and corresponding marginal tax rates the IRS announced for tax year 2024:

• 37% for individual single taxpayers with taxable incomes greater than $609,530 ($731,200 for married couples filing jointly).
• 35% for incomes over $243,725 ($487,450 for married couples filing jointly)
• 32% for incomes over $191,950 ($383,900 for married couples filing jointly)
• 24% for incomes over $100,525 ($201,050 for married couples filing jointly)
• 22% for incomes over $47,150 ($94,300 for married couples filing jointly)
• 12% for incomes over $11,600 ($23,200 for married couples filing jointly)
• 10% for incomes of $11,600 or less ($23,200 for married couples filing jointly)

The IRS adjusts more than 60 tax provisions, including income tax brackets, annually to prevent “bracket creep.” This happens when “inflation, rather than real increases in income, pushes people into higher income tax brackets, or reduces the value they receive from credits and deductions,” the Tax Foundation explains.

If your income in 2024 remains the same as it was in 2023, you will pay less money in taxes, Tom Wheelwright, founder and CEO of WealthAbility, explained.

The standard deduction, which reduces the amount of income on which people have to pay taxes, is also adjusted for inflation, Luscombe said. 

It will increase to $29,200 for married couples, $14,600 for individuals and $21,900 to people filing as heads of household, according to the IRS.

Apart from the income tax brackets and standard deductions, the maximum Earned Income Tax Credit (EITC) will increase by $400 to $7,830 for tax year 2024.

The EITC is for workers with low to moderate incomes. Eligibility for the tax credit is based on factors such as family size, filing status and income.