Please call us at 303.295.7077 to discuss how the enumerated changes shown below affect you and your family.
Beginning 1/1/23, the applicable income tax rates applied to taxable income are:
| RATE | SINGLE FILERS | MARRIED FILING JOINT FILERS |
|---|---|---|
| 10% | less than $11,000 | less than $22,000 |
| 12% | $11,001 to $44,725 | $22,001 to $89,450 |
| 22% | $38,701 to $82,500 | $77,401 to $165,000 |
| 24% | $95,376 to $182,100 | $190,751 to $364,200 |
| 32% | $182,001 to $231,250 | $364,201 to $462,500 |
| 35% | $231,251 to $578,125 | $462,501 to $693,750 |
| 37% | $578,126 and over | $693,751 and over |
The old tax rates were 10%, 15%, 25%, 28%, 33%, and 39.6% respectively.
The investment tax (3.8% of net investment income (interest, dividends, capital gains from non-trade or business income)) and applied when taxable income exceeds $200,000 (single filers) and $250,000 (married, joint filers) remains.
Capital gains (long term-meaning the asset holding period was at least a year and one day)- the applicable rate is 0% for those in the 10 and 12% rate brackets, 15% for those in the other tax rate brackets until income exceeds $500,000 (approx.) in which case the rate is 20%.
The standard deduction doubled meaning the advantages of itemizing deductions was reduced. The standard deduction doubled meaning the advantages of itemizing deductions was reduced. Itemized deductions include:
- Medical,
- Taxes (state income, state and local sales tax, property tax): the new limit here is $10,000
- Charitable
- Interest on a mortgage secured by a home
The new standard deduction is $25,900 (married, joint filers), and $12,950 (single filers).
The personal exemption deduction was removed (now $0).
Remember, our income tax structure is progressive meaning the applicable tax rate increases as your taxable income increases. Everyone benefits from the initial low rates, and as your income increases so does the applicable rate on the additional income you receive.
So, compare the progressive income tax structure to a flat tax, and yes, we do have a flat tax structure, otherwise known as payroll taxes. All Americans who earn a living through employment pay this flat tax. The rate is 7.65% of every dollar earned up to $160,200 of earnings, and 1.45% above $160,200 of earnings subject to a further .9% increase (a total of 2.35%) if your earned income exceeds $250,000).
Tax credits (as compared to tax deductions) reduce your tax obligation dollar for dollar. The child tax credit is $2,000 for each dependent child (age 17 or less). The child tax credit begins to phase out when modified adjusted gross income exceeds $400,000 (joint return or $200,000 (single filer).
The education tax credits remain for higher education and lifelong learning.
H&A tax Department personnel
John