Written by: Rita M. Ryan, JD, LLM, Victoria McHale
The IRS issued Rev. Proc. 2022-38, setting out inflation adjustments for the 2023 tax year. Before executing any tax planning in 2023, please consult your Wolf engagement team directly.
The important highlights of Rev. Proc. 2022-38 are summarized below.
Gift & Estate Tax
The gift tax annual exclusion will increase again in 2023 to $17,000 per year per donee for the upcoming tax year.
The lifetime gift and estate tax exemption will increase to $12,920,000 and the good and services tax (GST) exemption will also be adjusted to $12,920,000 in 2023.
The annual amount that can be gifted to a non-US citizen spouse in 2023 will increase to $175,000. All gifts to U.S. spouses will continue to qualify for the unlimited marital deduction.
Income Tax
Marginal Rates, Capital Gains Rates, and Alternative Minimum Tax:
For tax year 2023, the top tax rate remains at 37% – a breakdown by rate bracket is below:
| Tax Rate | Single | Married Filing Jointly | Head of Household |
| 10% | Up to $11,000
|
Up to $22,000 | Up to $15,700 |
| 12% | $11,000-$44,725
|
$22,000-89,450 | $15,700-59,850 |
| 22% | $44,725-$95,375
|
$89,450-190,750 | $59,850-95,350 |
| 24% | $95,375-$182,100
|
$190,750-364,200 | $95,350-$182,100 |
| 32% | $182,100-$231,250
|
$364,200-462,500 | $182,100-$231,250 |
| 35% | $231,250-$578,125
|
$462,500-693,750 | $231,250-$578,100 |
| 37% | Over $578,125
|
Over $693,750 | Over $578,100 |
The income thresholds for long-term capital gains rates have been adjusted as follows:
| Tax Rate | Single | Married Filing Jointly | Head of Household |
| 0% | Up to $44,625
|
Up to $89,250 | Up to $59,750 |
| 15% | $44,625-$492,300
|
$89,250-$553,850 | $59,750-$523,050 |
| 20% | Over $492,300
|
Over $553,850 | Over $523,050 |
The Alternative Minimum Tax exemption amount for tax year 2023 is $81,300 and begins to phase out at $578,150 for single filers and $1,156,300 for married filing joint filers.
Standard Deduction and Personal Exemptions
The standard deduction has been increased as follows:
| Filing Status | 2023 |
| Single | $13,850 |
| Married Filing Joint | $27,700 |
| Head of Household | $20,800 |
The personal exemption for tax year 2023 continues to remain at $0, as this was eliminated as part of the Tax Cuts and Jobs Act.
IRAs and ROTH IRAs
The limit on annual contributions to an IRA has increased to $6,500 in 2023.
The IRA catch-up contribution limit for individuals aged 50 and over remains at $1,000 as it is not subject to an annual cost of living adjustment.
The income limits for ROTH IRA contributions have been adjusted as follows:
| Filing Status | 2023 |
| Single & Head of Household | $138,000 (phase out beings) to $153,000 |
| Married Filing Jointly | $218,000 (phase out begins) to $228,000 |
Other Changes of Note
Qualified Business Income thresholds have been adjusted as follows:
| Filing Status | 2023 |
| Married Filing Jointly | $364,200 |
| Single + All Other Returns | $182,100 |
- The Foreign Earned Income Exclusion is $120,000 which is an increase from $112,000 from tax year 2022.
- The Lifetime Learning Credit is phased out for taxpayers with modified adjusted gross income more than $80,000 for single returns or $160,000 for married filing joint returns.
- Interest on education loans begins to phase out in 2023 when modified AGI exceeds $75,000 for single returns and $155,000 for married filing joint returns, and is completely phased out when modified AGI exceeds $90,000 for single returns and $185,000 for married filing joint returns. The maximum deduction remains capped at $2,500.
- The maximum credit allowed for adoptions in 2023 is up to $15,950 in 2023.
- For covered expatriates, the statutory exclusion amount has been increased to $821,000 in 2023.
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