The Social Security Administration has announced the Cost of Living Adjustment (COLA) for 2023. Based on the Consumer Price Index (CPI-W) from the third quarter of 2021 through the third quarter of 2022, recipients of Social Security and Supplemental Security Income (SSI) will receive an 8.7% increase in their 2023 payments. The average monthly Social Security payment will increase from $1,681 to $1,827 next year.
The rise of inflation has been a challenge in many ways, and this will be welcome news to those who rely heavily in this government program to meet their needs.
In addition to the rise in Social Security payments, below are other increases we’ll expect to see next year:
- Increase in the standard deduction on tax returns to $13,850 single/$27,700 joint. This is an increase of $900/$1,800, respectively.
- Marginal income tax thresholds are increasing. The top federal tax rate will remain 37%, but now only those with incomes greater than $578,125 single/$693,750 joint will be subject to this rate. Income thresholds are increasing at around 7% across the board.
- Federal Estate Tax exemption amount is $12,920,000 for 2023, up from $12,060,000.
- The annual federal gift tax exclusion amount will increase by $1,000 to $17,000 per recipient.
As we approach the end of 2022, remember to talk about these upcoming changes with your tax professional, and as always, reach out to us if you have any questions.