6. Alternative minimum tax (AMT)
The IRS has raised the income threshold for the AMT to $126,500 for married couples filing jointly, versus the prior $118,100. That means your income can be higher but still avoid the AMT tax. The AMT threshold for single filers is rising from $75,900 to $81,300.
7. Estate tax
The per-person estate tax exclusion for someone who dies in 2023 has increased to $12.92 million, up from $12.06 million, which means an additional $860,000 of a person’s total estate will be shielded from the 40 percent federal estate tax on amounts that exceed the IRS threshold. “I have never seen such a huge increase,” Featherngill said. “For some people this is going to be good news.”
8. Gift exclusion
The annual exclusion for gifts increases to $17,000, up from $16,000, which can help you avoid estate taxes by giving away more money before you die.
9. Adoption credit
The maximum credit allowed for adoptions and related qualified expenses rises to $15,950 from $14,890.
10. Foreign earned income
Americans who earn income outside the U.S. (and more do in the work-from-home world we live in since COVID) will also benefit from an increase in the foreign earned income exclusion to $120,000, a hefty $8,000 more than in the prior year.
11. Social Security payroll taxes
This is one CPI adjustment that will cost you more. Employees pay 6.2 percent of their income to fund Social Security, and employers pay the same. (The self-employed pay the full 12.4 percent). The maximum amount of earnings subject to the Social Security tax will increase next year from $147,000 to $160,200.
12. Veterans benefits
As with Social Security, veterans benefits will increase 8.7 percent with inflation. For a veteran receiving about $1,500 in monthly payouts, the increase will mean about $130 extra each month.
The CPI doesn’t only affect taxes and government benefits. Employers often base their annual raises on the CPI. And while not directly impacted by IRS rules, many landlords use an inflation index clause that adjusts rents to correspond with changes in inflation, says Dan Casey, owner and investment adviser at Bridgeriver Advisors. “Landlords,” he said, “are able to raise rates because of the CPI number as well.”
While all these inflation adjustments might not make up for all the $5-per-gallon fill-ups and pricey restaurant meals in the past year, the changes will offset some of the financial outlay due to higher inflation. “It does take some of the sting out of the inflation that we have all been experiencing,” Seltzer said.