It’s 2:00 a.m. on a cold February morning, do you know which tax bracket you’re in right now?
If you don’t, you’re in luck because I put this table together from the IRS that shows the tax brackets for 2023.
| Status | Tax Rate | on taxable income from… | up to… |
|---|---|---|---|
| Single | 10% | 0 | 11000 |
| Single | 12% | 11001 | 44725 |
| Single | 22% | 44726 | 95375 |
| Single | 24% | 95376 | 182100 |
| Single | 32% | 182101 | 231250 |
| Single | 35% | 231251 | 578125 |
| Single | 37% | 578126 | Infinity |
| Married | 10% | 0 | 22000 |
| Married | 12% | 22001 | 89450 |
| Married | 22% | 89451 | 190750 |
| Married | 24% | 190751 | 364200 |
| Married | 32% | 364201 | 462500 |
| Married | 35% | 462501 | 693750 |
| Married | 37% | 693751 | Infinity |
| Head of Household | 10% | 0 | 15700 |
| Head of Household | 12% | 15701 | 59850 |
| Head of Household | 22% | 59851 | 95350 |
| Head of Household | 24% | 95351 | 182100 |
| Head of Household | 32% | 182101 | 231250 |
| Head of Household | 35% | 231251 | 578100 |
| Head of Household | 37% | 578101 | Infinity |
I am going to go out on a limb and suggest that tax brackets are going to be higher in the future than they are today. With $34 trillion in debt, the U.S. Government is on an unsustainable path and the only way to manage this is going to be through increases in taxes. These were key points in books by David McKnight and Ed Slott.
This is why it’s important to build buckets of money that can be withdrawn tax free from retirement accounts such as the Roth 401k and Roth IRA. In Step 3, I projected that the standard deduction in 2052 might be as high as $115,000 so how would that impact my income and what might my tax bracket be?
I built a spreadsheet to calculate various tax bracket options and the impact they different changes in tax laws might impact my taxes and income flow. The tax bracket is clearly going to be dependent on the income flow so if I have $160,000 in income per year during retirement, I’ll be in a 24% tax bracket. If I have more $20,000 more in income I may push into the 35% tax bracket. Ouch! But this all assumes the tax brackets stay the same. What if tax brackets all go up by 5% or 10% or even 20%?
So putting together all the steps so far:
- Total all retirement accounts
- Estimate how much social security might provide
- Estimate what the IRS standard deduction might be during my retirement years.
- Estimate what tax bracket will apply to my situation
Next Step? Putting it all together. Click here for Step 5.