What Are the Income Tax Brackets for 2023 vs. 2022?

Tax brackets are an interesting topic at this time of year. That's because on the one hand, if you haven’t filed already, you are preparing to file your 2022 tax return (which is due April 18). But, on the other hand, you may already be thinking about your 2023 finances in a tax-efficient way. In either case, you need to be familiar with the federal income tax rates and tax brackets that apply to you. 

When it comes to federal income tax rates and brackets, the tax rates themselves aren't changing. The same seven tax rates in effect for the 2022 tax year – 10%, 12%, 22%, 24%, 32%, 35% and 37% – still apply for 2023. However, the tax brackets for each year are different (i.e., new beginning and ending dollar amounts are established for each bracket). That's because the tax brackets are adjusted each year to account for inflation. As a result, you could end up in different tax brackets in 2022 and 2023. That also means that you could pay a different tax rate on some of your income from in 2023 vs 2022.

Tax bracket ranges also differ depending on your filing status. For example, for single filers, the 22% tax bracket for the 2022 tax year starts at $41,776 and ends at $89,075. However, for head-of-household filers, it goes from $55,901 to $89,050. 

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For 2023, the 22% tax bracket range for singles is from $44,726 to $95,375, while the same rate applies to head-of-household filers with taxable income from $59,851 to $95,350. 

So, that's something to keep in mind when you are filing a return or planning to reduce a future tax bill.

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2022 Income Tax Brackets and Tax Rates

When you're working on your 2022 federal income tax return, here are the tax brackets and rates you will need based on your filing status:

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2023 Tax Rates and Brackets

If you're already thinking about how to handle your 2023 finances in a tax-efficient way — even though the filing season for 2022 returns has started – here are the 2023 federal income tax brackets and rates for the four most common filing statuses.

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Inflation's Impact on the 2023 Brackets

Since inflation has been high over the past year or so, the inflation adjustments impacted tax brackets more this year than what most of us are used to. 

This shows up when we look at the "width" of the 2023 brackets and see that they got comparatively wider than before. (Width is the amount of income taxed at the applicable rate – or in other words, the difference between the bracket's lowest dollar amount, and its highest dollar amount.)

An example of this is the 22% bracket for single taxpayers. For the 2021 tax year, the bracket ranged from $40,526 to $86,375, and covered $45,849 of taxable income ($86,375 – $40,526 = $45,849). For 2022, the 22% bracket for singles goes from $41,776 to $89,075, and covers $47,299 of taxable income ($89,075 – $41,776 = $47,299). So, from 2021 to 2022, the 22% bracket for single filers got $1,450 wider (i.e., $47,299 – $45,849 = $1,450).

For 2023, however, the width of the 22% singles bracket grew by more than twice as much. The 2023 bracket covers $50,649 of taxable income ($95,375 – $44,726 = $50,649), which is $3,350 wider than for 2022.

But that's okay. Wider tax brackets are a good thing, because they help to prevent "bracket creep." When a bracket gets wider, there's less of a chance that you'll end up in a higher tax bracket if your income stays the same or doesn't grow at the rate of inflation from one year to the next.

How Income Tax Brackets Work

Suppose you are single, and end up with $100,000 of taxable income in 2022. Since $100,000 is in the 24% bracket for single filers, will your 2022 tax bill simply a flat 24% of $100,000 – or $24,000? 

The answer is No. Your tax will actually be less than that amount. That's because using marginal tax rates, only a portion of your income is taxed at the 24% rate. The rest of your income is taxed at the 10%, 12%, and 22% rates.

Here's how it works. Again, assuming you're single with $100,000 taxable income in 2022, the first $10,275 of your income is taxed at the 10% rate for $1,028 of tax. The next $31,500 of income (the amount from $10,276 to $41,775) is taxed at the 12% rate for an additional $3,780 of tax. 

After that, the next $47,300 of your income (from $41,776 to $89,075) is taxed at the 22% rate for $10,406 of tax. That leaves only $10,925 of your taxable income (the amount over $89,075) that is taxed at the 24% rate, which comes to an additional $2,622 of tax. 

When you add it all up, your total 2022 tax is only $17,836. (That's $6,164 less than if a flat 24% rate was applied to the entire $100,000.)

Now, suppose you're a millionaire. (We can all dream, right?) If you're single, only your 2022 income over $539,900 is taxed at the top rate (37%). The rest is taxed at lower rates as described above. 

So, for example, the tax on $1 million for a single person in 2022 is $332,955. That's a lot of money, but it's still $37,045 less than if the 37% rate were applied as a flat rate on the entire $1 million (which would result in a $370,000 tax bill).

Capital Gains Tax Rates

It's important to note that the tax rates on capital gains from the sale of stocks, bonds, cryptocurrency, real estate, and other capital assets, aren't necessarily the same as the tax rates mentioned above for wages, interest, retirement account withdrawals, and other "ordinary" income. 

When determining the tax on capital gains, the rates that apply generally depend on how long you held the capital asset before selling it.

If you hold a capital asset for one year or less, any gain from the sale is considered short-term capital gain, and taxed using the rates for ordinary income listed above. 

However, if you hold a capital asset for more than one year, the gain is treated as long-term capital gain and taxed a lower rate – either 0%, 15%, or 20%. 

As with the ordinary tax rates and brackets, which specific long-term capital gains tax rate applies depends on your taxable income. However, the long-term capital gain brackets are set up so that you'll generally pay tax at a lower rate than if the ordinary tax rates and brackets were applied.

For more on the taxation of capital gains, see Capital Gains Tax 101.