The Internal Revenue Service announced the tax year 2023 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes.

• "The standard deduction for married couples filing jointly for tax year 2023 rises to $27,700 up $1,800 from the prior year.
• For single taxpayers and married individuals filing separately, the standard deduction rises to $13,850 for 2023, up $900,
• and for heads of households, the standard deduction will be $20,800 for tax year 2023, up $1,400 from the amount for tax year 2022.

Marginal Rates: For tax year 2023,
"the top tax rate remains 37% for individual single taxpayers with incomes greater than $578,125 ($693,750 for married couples filing jointly)."

The other rates are:

• 35% for incomes over $231,250 ($462,500 for married couples filing jointly);
• 32% for incomes over $182,100 ($364,200 for married couples filing jointly);
• 24% for incomes over $95,375 ($190,750 for married couples filing jointly);
• 22% for incomes over $44,725 ($89,450 for married couples filing jointly);
• 12% for incomes over $11,000 ($22,000 for married couples filing jointly).
• 10% for incomes of single individuals with incomes of $11,000 or less ($22,000 for married couples filing jointly).

The 7.1% adjustment is one of the biggest in decades, and more than twice what it was in 2022.

"While the changes affect everyone, they particularly have an impact on people whose income did not keep pace with inflation this year"

In addition, contribution limits for 401(k)s, IRAs, and HSAs have increased.

These tax changes in addition to the possibility of record high increases in paychecks can be very beneficial.

Heh. Just getting started. One of the first forms made me laugh out loud.

11. Subtract line 10 from line 9
12. Enter the smaller of line 9 or line 10
13. Enter one-half of line 12
14. Enter the smaller of line 2 or line 13
15. Multiply line 11 by 85% (0.85). If line 11 is zero, enter -0-
16. Add lines 14 and 15
17. Multiply line 1 by 85% (0.85)

They work really hard to make this ridiculous.

There are lots of changes to the 2018 IRS form 1040 and related schedules. The form 1040 is still 2 pages (sort of), but it is 2 half pages. It appears they could have fit it on a single page. Forms 1040A and 1040EZ are no longer in use.

Even though the 1040 form is half the size of previous years, there are at least 6 new schedules (Schedule 1-6)) that may be needed to include the data left out of the new 1040 form. Previous schedules, (Schedules A-F and more) are still in use.

The form 1040 instructions are 117 pages for 2018 versus 107 pages for 2017.

Prior years forms, instructions, publications. (prior to 2018)

When Social Security was initiated (1935), it was excluded from federal income taxation.

The Treasury Department's underlying rationale for not taxing Social Security benefits was that the benefits under the Act could be considered as "gratuities," and since gifts or gratuities were not generally taxable

In 1983, Congress passed and President Reagan signed into law the 1983 Amendments where up to one-half of the value of the Social Security benefit was made potentially taxable income.

In 1983, the Senate Finance Committee Report offered these additional observations: ". . . by taxing social security benefits and appropriating these revenues to the appropriate trust funds, the financial solvency of the social security trust funds will be strengthened. . ."

In 1983, Congress intended that the taxation provisions should not affect "lower-income individuals." The $25,000 for individuals and $32,000 for married filing joint thresholds were included to accomplish this.

In 2018, 35 years later the thresholds are the same, with an addition where if you file joint and make $44,000, more of your Social Security benefits are taxed.

When the law was originally enacted, only about 10% of the people receiving Social Security beneifts were affect by the law. By 1993, approximately 18% were affected. Now, in 2018, about 56% of Social Security beneficiaries are affected by the law.

But, then as now, they do not elect to eliminate the threshold for which Social Security taxes are withheld from payroll, which would also have strengthened the financial solvency of Social Security.

It is now time to modify this law to, at a minimum, raise the threshold as to when Social Security beneficiaries are taxed on their Social Security benefits.

Join Dr. Matt Harris for a discussion of A Fine Mess: A Global Quest for a Simpler, Fairer and More Efficient Tax System by T. R. Reid at noon on Wednesday, June 27 in the East Tennessee History Center auditorium. Bring your lunch or pick up something downtown. Drinks are available for fifty cents. Reading the book is optional.

"Just about every economist and political figure in America agrees these days that our tax code has to be reformed," the author says. Believing we have reached a breaking point, Reid travels around the globe visiting countries like Estonia, New Zealand and United Kingdom to investigate how others tax their residents. Ultimately, he affirms his belief that the United States is capable of a radical reform for a "fairer, simpler and more efficient" tax system.