Happy 2023! Now is an excellent time to review changes to individual income tax brackets due to inflation. Here, we highlight the relationship between inflation and income taxes. To see details of all the 60 tax provisions changed for 2023, the Internal Revenue Service (IRS) published this document.
How inflation and income taxes are related
As we discussed in our post from last month, the Consumer Price Index (CPI) continues its downward trend. Unfortunately, the CPI of 7.1% for November is still above the long-term norm of 2-3%. However, there is some good news for U.S. income taxpayers in 2023. The IRS adjusts income tax brackets for inflation, so income and capital gains tax brackets in 2023 have increased by about 7%. The images below show these new brackets for income, capital gains, and the standard deduction.
2023 tax rates on retirement income
So, income tax brackets recently changed in a significant way. Our optimal retirement income calculator now provides an updated forecast for after-tax retirement income using the 2023 tax brackets. Forecasts based on the Common Rule withdrawal strategy remain free for 2023. In addition, you can expedite your calculations by registering a free profile. For individuals or financial planners wishing to use our award-winning tool to see the details that led to their individualized tax alpha, please consider subscribing before the price goes up.
Live Software Demonstration
On Saturday, January 14th from 10-11 am Pacific Time (1-2 pm Eastern Time), we will be conducting a live demonstration of our retirement income and retirement savings calculators, fielding your questions, and discussing new features planned for 2023. Please use the link below to join us at this time. If you wish, please contact us prior to this demonstration with any questions you may have or use cases you wish to see.