The IRS made some pretty big inflation adjustments in 2023, affecting the standard deduction, marginal tax rate and more. Lisa Greene-Lewis, TurboTax expert and CPA, explains. Read the transcript below or watch the video above.
Tracy Byrnes: Inflation is everywhere including on your tax return. Thankfully, the IRS is paying attention and making some adjustments for us. Lisa Greene-Lewis, TurboTax expert and CPA is here with us right now. So certain things have actually been adjusted for inflation, haven't they?
Lisa Greene-Lewis: Yes. So every year, there are inflation adjustments to certain things. But 2023—it is said that it is the largest adjustments that there have been in a long time. They're saying that it's about up 7%.
So inflation adjustments are things like the standard deduction that increases every year. Gift tax exclusion. Marginal tax rates, not the rates themselves but the spread of income within those rates. So those are just some examples of what have increased.
Tracy Byrnes: So when people go to do their tax returns, they should be — they should take into account the fact that they may be getting more of a deduction because of inflation?
Lisa Greene-Lewis: Yeah. So the standard deduction that has gone up to $13,850 if you're single, $27,700 married filing jointly. So that's a pretty big deduction for people that are not able to itemize. The Earned Income Tax Credit: That's another one that is up over $7,000 with three or more kids depending on your income.
Tracy Byrnes: And the marginal tax rate, the ranges within the marginal tax rate, all these things are worthy then of maybe doing a little bit of a projection before year-end. Because if you're teetering on the edge of something, you might make it a move to bump yourself up or down depending on where you need to be.
Lisa Greene-Lewis: Yes. That is true. So knowing all of these changes, you could make some smart moves by the end of the year. You could use TurboTax TaxCaster to see where you're at and see if you need to make some moves by the end of the year. And also, see how these credits or adjustments will help your tax situation.
Tracy Byrnes: Well, it's good to know that IRS is feeling the inflation burn as well. Lisa Greene-Lewis, TurboTax expert and CPA, thank you for that.
Lisa Greene-Lewis: Thank you for having me.
