How do tax brackets work? Here’s a handy guide for the 2023 tax brackets you can use when prepping your 2023 taxes, which are due by April 15, 2024.
Just like in previous years, there are seven federal tax brackets for 2023: 10%, 12%, 22%, 24%, 32%, 35% and 37%. States have their own rules on how they tax income, if they tax income at all.
What typically changes is the range of income that is taxed at each of the seven rates. For example, when filing for the 2022 tax year, the income bracket subject to the 22% tax rate for a married couple filing jointly was between $83,550 and $178,150. In 2023, the 22% tax bracket shifted higher to between $89,451 to $190,750.
But before we answer the question “how do tax brackets work?” let’s back up and untangle progressive tax math.
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HOW DO TAX BRACKETS WORK? A GUIDE
The “progressive tax system” we have in the U.S. simply means not all of your income is taxed at the same rate.
The first chunk of income you earn is taxed at the lowest tax rate (10%). The dollars you earn above that — and up to a specific amount — are taxed at the next higher tax rate (12%), and so on it goes until you earn so much that you somehow don’t have to pay taxes at all. (Apologies to gabillionaires for the snark.)
When someone says they are in the 22% tax bracket, it’s a bit of a misnomer. What that really means is that they pay 22% on the portion of their income subject to the highest tax rate — just the dollars that fall within that particular bracket — not every dollar they earn. In tax-speak, this is called the marginal tax rate.
The 2023 tax brackets
Your tax bracket is based on your income and your filing status (single, married filing jointly, married filing separately, head of household.) Each year the IRS adjusts tax brackets and other tax provisions to account for inflation. As you look at the brackets below, remember that the standard dedication you take is untaxed, be it $13,850 if you are a single person or $27,700 if you are married and filing jointly and $20,800 for heads of household. This effectively makes everyone’s tax rates a little bit lower, since the amount they’re being taxed on isn’t what they’re really earning, explains David Barrett, CPA, Lecturer in Accounting at the Maine Business School at the University of Maine.
| Tax rate | If you are single and your income is | If you are married filing jointly and your income is |
| 10% | less than $11,000 | less than $22,000 |
| 12% | between $11,001 and $44,725 | between $22.001 and $89,450 |
| 22% | between $44,726 and $95,375 | between $89,451 and $190,750 |
| 24% | between $95,376 and $182,100 | between $190,751 and $364,200 |
| 32% | between $182,101 and $231,250 | between $364,201 and $462,500 |
| 35% | between $231,251 and $578, 125 | between $462,501 and $693,750 |
| 37% | more than $578,125 | more than $693,750 |
Source: IRS.gov
For comparison, here are the 2022 tax brackets:
| Tax rate | If you are single and your income is | If you are married filing jointly and your income is |
| 10% | less than $10,275 | less than $20,550 |
| 12% | between $10,275 and $41,775 | between $20,550 and $83,550 |
| 22% | between $41,775 and $89,075 | between $83,550 and $178,150 |
| 24% | between $89,075 and $170,050 | between $178,150 and $340,100 |
| 32% | between $170,050 and $215,950 | between $340,100 and $431,900 |
| 35% | between $215,950 and $539,900 | between $431,900 and $647,850 |
| 37% | more than $539,900 | more than $647,850 |
Source: IRS.gov
Some tax bracket examples
Let’s start with a married couple filing a joint return with $190,000 in taxable income. Note that these figures are created before deductions are taken! They will pay:
- 10% federal income tax on the first $22,000 of income (which comes to $2,200 in taxes)
- 12% on dollars $22,001 up to $89,450 ($8,093.88 in taxes)
- 22% on $89,451 up to $190,750 ($22,120.78 in taxes)
All told, before deductions, this couple will pay a total of $32,414.66 in federal income taxes, which averages out to be about 17% of their income.
A single filer earning $60,000 in 2022 will pay:
- 10% federal income tax on the first $11,000 of income (which comes to $1,100 in taxes)
- 12% on dollars $11,001 up to $44,725 ($4,046.88 in taxes)
- 22% on $44,726 up to $95,375 ($3,360.28 in taxes)
The total federal income tax our single citizen pays before deductions is $8,507.16, which comes to about 14% of their income. For cocktail party smalltalk, however, this person can say that they are “in the 22% tax bracket” based on the tax rate they pay on the next dollars they earn.
What’s the big deal?
While tax brackets are useful tools, it’s always advisable to make as much money as possible. Every dollar you make means more money goes into your pocket, Barrett says. The only thing that changes is how much of that incremental dollar you get to keep.
The most important part of knowing your tax bracket is to use the knowledge to keep as many dollars in the lower brackets as possible. You do that by reducing your taxable income. The most effective ways to do that are to:
Funnel money into tax-deferred retirement accounts like a traditional IRA, a 401(k) or 403(b). Those dollars won’t count as taxable income in the year you make the contribution. You’ll owe income taxes on the back end when you start taking withdrawals. But hopefully by then you’re in a lower income tax bracket.
Take advantage of flexible spending accounts (FSAs) (including dependent-care FSAs) and health savings accounts (HSAs). The money you save in those will also reduce your taxable income for the year. Plus they have the advantage of being tax-free when you use the funds to pay for qualified expenses.
Take as many tax deductions as you’re allowed. When you take a tax deduction you get to subtract the amount from your taxable income. Most people take the standard deduction, which is an amount that you can automatically deduct from your income taxes without having to itemize.
The IRS has also increased the standard deduction for your 2023 taxes:
- The standard deduction for 2023 taxes for single taxpayers and those who are married filing separately is $13,850. That is an increase of $900 from 2022.
- The standard deduction for heads of households is $20,800, up $1,400 from 2022.
- The standard deduction for married couples filing jointly is $27,700, an increase of $1,800 from 2022.
Although there is no limit on itemized deductions, the general rule is that you should take the standard deduction if the itemized account adds up to less than the standard deduction.
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