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A New Tax Regime: Winners All! / By: Ria Tharakan

The IRS created tax brackets to implement America's progressive tax system, which taxes higher levels of income at steadily higher rates. The brackets help determine how much money you need to pay the IRS annually as the amount of taxes you pay is dependent on your income. If your taxable income increases, the taxes you pay will increase. Due to rising inflation rates, the IRS announced in October 2022 that tax brackets for individual and married filers would be adjusted by 7% for the 2023 tax year.

This tax policy allows citizens to benefit whereby if their income isn’t keeping up with inflation, the increases in the brackets make it less likely they’ll pay higher tax rates.  This is a huge relief for the taxpayers as they will have more money at their disposal that will allow them to spend more, which will eventually benefit the government. Sakshi Mundra, an Equity Analyst, states that“having a higher disposable income is preferred to purchase groceries and pay rent as we are still battling with inflation.” As the tax brackets move alongside the inflation rate, the amount of tax you pay on your income gradually shifts. 10% on taxable income is taxed up to $11,000, 12% up to $44,725, and 22% above that up to $95,375 (AARP, 2022).

The Tax Cuts and Jobs Act of 2017 eliminated personal deductions and made standard deductions higher than before. A standard deduction is a specific dollar amount that reduces the amount of income on which you're taxed. The standard deduction is adjusted each year for inflation and varies according to your filing status. In addition, the standard deduction will rise to $13,850 for single filers for the 2023 tax year, from $12,950 the previous year (AARP, 2022). Richard Heinz, a tax professional, argues that by eliminating itemizing deductions and using the standard deduction, tax filers can simplify their tax returns. However, getting deductions for charitable contributions becomes difficult as it is part of itemized deductions.”  

Across the board, this new tax policy should benefit almost everyone!



Sakshi Mundra

Richard Heinz


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