The IRS Has Announced Various Tax Benefit Increases for 2023

Tax Item

2023

2022

Highest tax rate of 37%

Will affect singles with income exceeding $578,125 ($693,750 for married taxpayers filing jointly).

Affects singles with income exceeding $539,900 ($647,850 for married couples filing jointly).

Standard deduction

Will increase to $13,850 for single taxpayers, $27,700 for married couples filing jointly, and $20,800 for heads of household.

$12,950 for single taxpayers, $25,900 for married couples filing jointly, and $19,400 for heads of household.

Personal exemption

$0*

$0*

Alternative minimum tax exemption

$81,300 ($126,500, for married couples filing jointly).

$75,900 ($118,100, for married couples filing jointly).

Estates

Decedents who die during 2023 will have a basic exclusion amount of $12.92 million.

Decedents who die during 2022 have a basic exclusion amount of $12.06 million.

Annual exclusion for gifts

The first $17,000 of gifts to any person (other than gifts of future interests) aren't included in the total amount of taxable gifts.

The first $16,000 of gifts to any person (other than gifts of future interests) aren't included in the total amount of taxable gifts.

Foreign earned income exclusion

$120,000

$112,000

Gifts to non-U.S. citizen spouse

The exclusion from tax on a gift to a spouse who isn't a U.S. citizen will be $175,000.

The exclusion from tax on a gift to a spouse who isn't a U.S. citizen is $164,000.

"Kiddie Tax"

Amount used to reduce the net unearned income reported on a child's return that's subject to the kiddie tax will be $1,250.

Amount used to reduce the net unearned income reported on a child's return that's subject to the kiddie tax is $1,150.

Flexible spending arrangements (FSAs)

The annual limit on employee contributions to employer-sponsored health FSAs will increase to $3,050. If the cafeteria plan permits the carryover of unused amounts, the maximum carryover amount is $610.

The annual dollar limit on employee contributions to employer-sponsored health FSAs is $2,850. If the cafeteria plan permits the carryover of unused amounts, the maximum carryover amount is $570.

Qualified transportation fringe benefit

For tax years beginning in 2023, the monthly limit for the qualified transportation fringe benefit and the monthly limit for qualified parking is $300.

For tax years beginning in 2022, the monthly limit for the qualified transportation fringe benefit and the monthly limit for qualified parking is $280.