2023 Tax Brackets, Deductions, and Credits

2023 tax deductions and credits

Staying up-to-date on tax-related changes and news is the only way to ensure that you can form a solid tax strategy to save instead of having a large tax bill come April. Tax laws and rules are changing constantly, and understanding what the new changes are every year is absolutely necessary. 


Ready to get a head start on your 2023 taxes? Check out our guide to 2023 tax planning strategies to ensure you’re ready ahead of time

2023 Standard Deductions

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The standard deduction is the pre-determined amount of money that every taxpayer is entitled to exclude from their taxable income every year. The deduction amount will vary depending on your filing status: head of household, single, married filing jointly, or married filing separately. 

Standard deductions make filing substantially easier than trying to itemize deductions, as they don’t require any calculations or documentation that you have to factor in all year. Your deduction status is simply determined by your filing status. 

The standard deduction for married couples who are filing jointly in 2023 increased by $1,800 from 2022 to $27,700. For taxpayers filing as single, or for married individuals filing separately, the deduction rose $900 to $13,850. For heads of households, the deduction rose $1,400 from 2022 to $20,800 in 2023. 

2023 Tax Brackets

There have been a few changes to the tax brackets in 2023, although some rates have stayed the same. The top tax rate will remain at 37% for individual taxpayers with income higher than $578,125 or $693,750 for married couples who file jointly. 

The other tax rates are:

  • 35% for incomes over $231,250 ($462,500 for married couples filing jointly);
  • 32% for incomes over $182,100 ($364,200 for married couples filing jointly);
  • 24% for incomes over $95,375 ($190,750 for married couples filing jointly);
  • 22% for incomes over $44,725 ($89,450 for married couples filing jointly);
  • 12% for incomes over $11,000 ($22,000 for married couples filing jointly).

The lowest tax rate is 10% for income of single taxpayers with an annual income of $11,000 or less, or for married couples filing jointly earning $22,000 or less. 

Capital Gains in 2023

Capital gains tax is something that investors pay on the profit of a sale of an asset. How capital gains are taxed will depend on how long you had held the asset before you sold it, as well as your tax bracket and filing status. These assets will include stocks, bonds, crypto, vehicles, and real estate investments. 

The capital gains tax rate will be either 0%, 15%, or 20% on most assets and investments held for longer than a year. If you hold these assets for less than a year before selling, then your tax rate will correspond to whatever your ordinary income bracket is.

The 2023 capital gains taxes are:

Tax-filing status 0% tax rate 15% tax rate 20% tax rate
Single $0 to $44,625. $44,626 to $492,300. $492,301 or more.
Married, filing jointly $0 to $89,250. $89,251 to $553,850. $553,851 or more.
Married, filing separately $0 to $44,625. $44,626 to $276,900. $276,901 or more.
Head of household $0 to $59,750. $59,751 to $523,050. $523,051 or more.

Child Tax Credit for 2023

child tax credit 2023, federal estate and gift tax

The Child Tax Care credit is a tax credit that any taxpayer with children can benefit from, so long as their children are listed as qualified dependents on their tax return. 

In 2021, this tax credit was increased from $2,000 per child to $3,000 per child, as well as a total of $3,600 for any children under the age of six. 

However, this amount will not increase in 2023. The maximum amount any taxpayer can claim per child will be $2,000, with up to $1,500 being refundable. 

Federal Estate and Gift Tax for 2023

The IRS has increased the annual gift tax exclusion for 2023, with record-high levels of inflation in 2022 being a prime reason for doing so. The exclusion for 2023 will increase to $17,000 per recipient, which is also the highest exemption amount they have set yet. In addition, the amount you are allowed to give to a spouse who is not a U.S. citizen has been increased to $175,000 for the 2023 tax year. 

Furthermore, the estate and gift exemption will be set to $12.92 million per your lifetime for gifts or deaths, an increase from the $12.06 million exemption in 2022. This effectively means that married couples can have $25.84 million that is shielded from any federal estate or gift taxes. Lastly, for any couples who may have already maxed out their lifetime gifts, they can now give away another $1.72 million for the 2023 tax year. 

Bottom Line

Tax preparation is an aspect of financial planning that many fail to account for. Although many focus extensively on asset allocation and what they are investing in, what they fail to do in conjunction with this is to account for asset location, or pay close attention to what types of accounts they invest in and the future tax consequences or benefits down the line.

This will irrefutably have a severe impact on your financial plan, especially when it comes to retirement. This is why understanding the changing tax laws and rates is imperative to good planning. Furthermore, there are always some types of changes that occur every year, and diligent investors, especially those approaching retirement, should pay close attention to these changes. 

To understand how to better structure your tax plan and take advantage of tax benefits, contact one of the financial professionals at SGL Financial today to see how they can help. 

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