Tax Brackets 2023

1 min readLast updated October 4, 2023by Rachel Carey

Discover the federal income brackets for 2022 (for tax filings submitted in 2023) and why they have changed. See what this means for your tax filing and how your calculated AMT threshold may affect your filing.

When it comes to federal income tax brackets, the only constant is change. Annually updated by the Internal Revenue Service (IRS) to account for inflation and filing status, income tax bracket adjustments prevent “bracket creep” and ensure only “real income” is assessed.

2022 tax brackets

Federal tax bracket categories refer to the different income ranges subject to different tax rates under the United States federal income tax system.

The tax system in the US is a progressive tax system, which means that as your income increases, you move into higher tax brackets and pay a higher percentage of your income in taxes.

There are generally seven federal tax brackets, each with its own tax rate—the last date you had to file a return this year was 18 April 2023.

Not sure if you need to file? No problem; you can use the free tool on the IRS website.

The brackets and federal tax rates for 2022 (for tax filings submitted in 2023) are as follows:

  1. 10 percent on taxable income up to $10,275

  2. 12 percent on taxable income over $10,276 but not over $41,775

  3. 22 percent on taxable income over $41,776 but not over $89,0754

  4. 24 percent on taxable income over $89,076 but not over $170,050

  5. 32 percent on taxable income over $170,051 but not over $215,950

  6. 35 percent on taxable income over $215,951 but not over $539,900

  7. 37 percent on taxable income over $539,900

Marginal taxation

Here’s where it gets interesting.

Say you earn $50,000 annually; it’s not simply a case of finding the £50k tax bracket and deducting 22 percent of 50,000. Here in the US, we use a marginal taxation system, meaning that on a salary of $50,000, you would apply a ten percent rate to the first $10,275 of taxable income, 12 percent on the next $31,500 taking you up to $41,775 and then only the higher rate of 22 percent on the final $8,225.

This is where experienced tax professionals can help.

What is the standard deduction for 2023?

To determine your federal income tax liability, you would first calculate your taxable income by subtracting any deductions and exemptions from your gross income. One of these is the standard deduction. This is a portion of income that you don’t pay federal taxes on. The IRS sets it each year.

So, what is the standard deduction for 2023

According to the IRS, the standard deduction for 2023 for married couples filing jointly for the tax year 2023 will rise to $27,700, up $1,800 from 2022.

Filing status counts

Your filing status relates to whether you are single, married, or a “head of household.”

For single taxpayers and married individuals filing separately, the standard deduction will rise to $13,850 for 2023, up $900. For heads of households, the standard deduction will be $20,800 for the tax year 2023, up $1,400 from the amount for tax year 2022.

You can learn more about filing your tax return in our dedicated tax filing explainer.

What are the AMT thresholds for 2022?

The Alternative Minimum Tax (AMT) is a separate tax calculation to ensure that wealthy individuals and corporations pay a minimum level of tax.

The AMT exemption is the amount of income exempt from the AMT calculation. It is the amount of income that a taxpayer can earn before the AMT applies.

For the tax year 2022–23, the AMT exemption amount is $81,300 and begins to phase out at $578,150. This is $126,500 for married couples filing jointly for whom the exemption begins to phase out at $1,156,300.

How to calculate your effective tax rate

To calculate your effective tax rate, you need to know your total income and the total taxes you paid for the year.

Use the following four-step process to help calculate your effective tax rate:

  1. Add up all your sources of income for the year, including your salary, bonuses, investments, and any other income you received.

  2. Subtract any deductions or exemptions you're eligible for, such as contributions to a retirement plan or charitable donations.

  3. Calculate your total tax liability using the tax brackets and rates that apply to your income level. You can find this information on the IRS website or consult a tax professional.

  4. Divide your total tax liability by your taxable income to determine your effective tax rate. For example, if your taxable income was $50,000 and your total tax liability was $8,000, your effective tax rate would be 16 percent.

Remember that this is just an estimate of your overall tax rate and may not reflect your actual tax burden due to the many factors that can impact your tax liability, such as AMT or other deductions, credits, and exemptions.

Calculating your tax rates and knowing when and what you must file can be tricky. For real peace of mind, a professional financial advisor can help guide you through the process. Unbiased can assist you with your move's financial ins and outs. Find the right advisor for your needs today.

Senior Content Writer

Rachel Carey

Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.