facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
%POST_TITLE% Thumbnail

New Income Tax Brackets – How They Impact You

Assets

By Brittany Manning, CPA, CFP®, Director of Wealth Management Services

In late fall, the Internal Revenue Service (IRS) released adjusted income tax brackets for the 2023 tax year. The 7.1% adjustment to the brackets was one of the biggest we have seen in decades. These adjustments added thousands of dollars to most of the marginal tax brackets, which could mean more money in your pockets come tax filing time. 

The 2023 adjustments are due to inflationary numbers, which saw quite a jump throughout 2022. The changes to the IRS marginal brackets also were paired with increases to the standard deduction for files, which in 2023 will be $27,700 for married couples filing jointly ($13,850 for single filers). 

So, what does all this mean in practical terms for you? Simply put, as the brackets widen, more of your taxable income can be taxed at a lower marginal rate. This is especially true if your income will not change substantially between 2022 and 2023. 

Additionally, there are some other planning tactics to consider implementing.

  1. Review your itemized deductions. With the higher standard deduction in 2023, it may be more advantageous for more people to use the standard deduction for 2023. It could be beneficial to review which expenses cause you to itemize to see if there can be any manipulation of these. It may also be worthwhile to review charitable giving in coordination with your itemized deductions, as these can swing you from being a standard deduction to an itemizer.
  2. Consider Roth conversions. With the expanded brackets, there may be some opportunities to take advantage of reduced taxes on converting some pre-tax funds to Roth in 2023. 
  3. Review your retirement contribution savings plan. The limits for individual contributions to 401(k) and 403(b) accounts has been increased to $22,500. For participants over age 50, there is an additional catch-up contribution of $7,500, for a total of $30,000. IRA contribution limits have also been increased to $6,500 ($7,500 for those over 50). These pre-tax contributions reduce your taxable income. 
  4. Review any HSA savings. Contribution limits for Health Savings Accounts have also seen increases. The total for individuals in 2023 is $3,850 and for a family is $7,750. These are also pre-tax deferrals that can reduce your taxable income in the 2023 filing year. 

The 2023 changes to the income tax brackets as well as savings limits are intended to help offset some of the pain of inflation felt by many Americans. To discuss how you can take advantage of these changes to benefit your individual tax situation, please reach out to schedule a time discuss.

DOWNLOAD THE ARTICLE

RETURN TO PERSPECTIVES AND NEWS

IMPORTANT DISCLOSURE INFORMATION 

MCF Advisors, LLC (“MCF”) is a SEC registered investment adviser. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. More information about the adviser can also be found by visiting: https://adviserinfo.sec.gov/. This is not intended as an offer or solicitation with respect to the purchase or sale of any security. MCF may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by MCF), or any non-investment related content, made reference to directly or indirectly in this blog/newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog/newsletter serves as the receipt of, or as a substitute for, personalized investment advice from MCF. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. MCF is neither a law firm nor a certified public accounting firm and no portion of this content should be construed as legal or accounting advice. A copy of MCF’s current written disclosure statement and customer relationship summary (“Form CRS”) discussing our advisory services and fees continues to remain available upon request. The scope of the services to be provided depends upon the needs of the client and the terms of the engagement. If you are a MCF client, please remember to contact MCF, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services.