6. Alternative Minimum Tax (AMT)
The IRS raised the income threshold for AMT to $126,500 for married couples filing jointly, from $118,100 previously. This means your income can be higher while avoiding the AMT tax. The AMT threshold for single filers is increased from $75,900 to $81,300.
7. Property tax
The per capita estate tax exclusion for someone who died in 2023 increased to $12.92 million from $12.06 million, meaning an additional $860,000 of the total estate of a person will be protected from federal estate tax of 40% on amounts that exceed the IRS. threshold. “I’ve never seen such a huge increase,” Featherngill said. “For some people, this will be good news.”
8. Gift exclusion
The annual exclusion for gifts is increased to $17,000 from $16,000, which can help you avoid estate tax by giving more money before you die.
9. Adoption Credit
The maximum credit allowed for adoptions and related eligible expenses is increased from $14,890 to $15,950.
10. Income earned abroad
Americans earning income outside of the US (and more so in the work-from-home world we’ve been living in since COVID) will also benefit from an increase in the foreign-earned income exclusion to 120,000 $, which is $8,000 more than the previous year.
11. Social contributions
This is a CPI adjustment that will cost you more. Employees pay 6.2% of their income to fund Social Security, and employers pay the same. (The self-employed pay the full 12.4%). The maximum amount of income subject to 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% with inflation. For a veteran receiving about $1,500 in monthly payments, the increase will mean about $130 more each month.
The CPI does not only affect taxes and government benefits. Employers often base their annual increases on the CPI. And while not directly affected by IRS rules, many landlords use an inflation escalation clause that adjusts rents based on changes in inflation, says Dan Casey, landlord and investment advisor at Bridgeriver Advisors. “Owners,” he said, “are also able to raise rates because of the CPI number.”
While all of these inflation adjustments may not offset all of the $5-a-gallon fill-ups and expensive restaurant meals of the past year, the changes will offset some of the financial expense due to higher inflation. “It alleviates some of the inflation that we’ve all experienced,” Seltzer said.