The tax filing season in the United States is approaching, so this is a good time not only to celebrate and share with your family, but also to prepare for the changes coming in the next tax season in 2023, which will have significant impacts on your personal finances.

Here are the five things you should know about taxes in the U.S. for 2023.

(1) New tax categories

The Internal Revenue Service (IRS) adjusted tax categories according to inflation. Recall that income taxes in the United States are progressive, which means that the more income a taxpayer generates, the more taxes he/she must pay.

For this year, the tax brackets corresponding to income are:

1. 10% for taxpayers with income of $11,000 or less
2. 12% for taxpayers with income over $11,000
3. 22% for taxpayers with income of $44,725
4. 24% for taxpayers with income up to $95,375
5. 32% for taxpayers with income up to $182,100
6. 35% for taxpayers with income up to $231,250
7. 37% for taxpayers with income up to $578,125

(2) The standard deduction amount will be adjusted

The IRS adjusts the standard deduction amount based on inflation. For 2023, this amount for individual taxpayers will rise from $900 to $13,850. For joint taxpayers, the amount rises to $27,700. For heads of household, the amount will rise to $20,800.

(3) Contribution limits for retirement accounts will increase

In 2023, IRAs will have a tax-deductible contribution limit of up to $6,500 per year, an increase of $500 over the current 2022 amount of $6,000.

In order to make contributions to a Roth IRA, individuals must have an adjusted income below $153,000 per year, an amount higher than this year’s current amount of $144,000 per year.

Contributions to 401(k) retirement plans – which are offered by employers to contribute to their workers’ retirement savings – will increase to $22,500 per year, up from this year’s current amount of $20,500 per year. Individuals age 50 and older can make contributions of up to $30,000 per year.

(4) The Earned Income Tax Credit (EITC) to be adjusted

The Earned Income Tax Credit (EITC) is a tax relief offered by the U.S. federal tax authorities to low-income workers and families.

During the 2022 tax year (in 2023), the amount of these credits will be modified as follows:

1. Workers without children: $600
2. Workers with one qualifying child: $3,995
3. Workers with two qualifying children: $6,604
4. Workers with three qualifying children: $7,430

(5) The saver’s credit

The saver’s credit is a stimulus designed to help low- and middle-income taxpayers. It consists of a tax credit for eligible contributions to your individual retirement account IRA, your 401(k) employer-sponsored retirement plan.

Hi, I am Nikesh Mehta, owner and writer of this site. I’m an analytics professional and also love writing on finance and related industry. I’ve done online course in Financial Markets and Investment Strategy from Indian School of Business. I can be reached at [email protected].