Additionally, the agency released the standard deduction for next year. It is increasing by USD 900 to USD 13,850 for single taxpayers, and by USD 1,800 for married couples, to USD 27,700. For heads of household, the 2023 standard deduction will be USD 20,800. That’s an increase of USD 1,400.


Each year the IRS adjusts dozens of important tax provisions based on a formula set by Congress. Given rising inflation rates over the past year, the adjustments for 2023 are more significant than in past years.


Assuming all else stays the same, this means that workers will see higher take-home pay starting in January 2023. To take advantage of the potential increase in take-home pay, the Chief Investment Office suggests directing the additional dollars towards savings rather than spending.


“Finding extra dollars in your take-home pay can make it tempting to increase your standard of living, but it will only make it harder to save for retirement,” according to Ainsley Carbone, Total Wealth Strategist, CIO Americas.


“So, rather than relying on sheer force of will, if you know your take-home pay will increase at the beginning of the year, consider adjusting direct deposits ahead of time,” she says.


“If you can direct those extra dollars to a savings or investment account in advance, you won’t even notice a difference and will hopefully avoid any temptation.”


While the agency has yet to announce the maximum contribution amounts to 401(k) plans or the income thresholds for retirement accounts for 2023, this information should be available when it comes time to establish your budget and savings strategy for 2023.


Last week, the Social Security Administration announced a decades-high cost-of-living-adjustment, also due to inflation.


Here are the marginal rates for tax year 2023, depending on your tax status...


Single filers


- 10%: income of $11,000 or less
- 12%: income between $11,001 and $44,725
- 22%: income between $44,726 and $95,375
- 24%: income between $95,376 and $182,100
- 32%: income between $182,101 and $231,250
- 35% income between $231,251 and $578,125
- 37%: income greater than $578,125


Married filing jointly


- 10%: income of $22,000 or less
- 12%: income between $22,001 and $89,450
- 22%: income between $89,451 and $190,750
- 24%: income between $190,751 and $364,200
- 32%: income between $364,201 and $462,500
- 35% income between $462,501 and $693,750
- 37%: income greater than $693,750


Additionally, the maximum Earned Income Tax Credit for 2023 is USD 7,430 for those who have three or more qualifying children. The maximum contribution to a health care flexible spending account is also increasing, from USD 2,850 to USD 3,050.


Americans will also be able to exclude significantly more assets from the estate tax in 2023. Individuals will be able to transfer up to USD 12.92 million tax-free to their descendants, up from just over USD 12 million in 2022. A married couple can pass on double that. And the annual exclusion for gifts increases to USD 17,000.


See the full press release from the IRS.


For more information from the UBS Chief Investment Office, see Where should I put my savings?, a savings waterfall to help you prioritize your after-tax growth potential.




Neither UBS Financial Services Inc. nor any of its employees provide tax or legal advice. You should consult with your personal tax or legal advisor regarding your personal circumstances.


©UBS 2022. All rights reserved. UBS Financial Services Inc. is a subsidiary of UBS AG. Member FINRA/SIPC.


Please note that this item is approved with comments for use with clients and prospects.

(For Public Distribution)

Expiration: 10/31/23

Approval date: 10/20/2022

Review Code:IS2206000