Tax season may be months away, but it’s never too early to determine what impact the Internal Revenue Service’s annual inflation-indexed tax adjustments will have on your bottom line.

The IRS announced its 2021 adjustments on 60 different tax provisions, including tax rate schedules and other taxes just hours after the Consumer Price Index was released, revealing that inflation hit a 31-year higher in October.

Taken together, the inflation adjustments for tax years 2021 and 2022 lay out what taxpayers can expect to be able to deduct and pay in 2023 and give them a chance to plan for their taxes now.

The standard deduction rises to $25,100 for married couples filing jointly in their 2022 returns. That’s a $300 increase. It rises to $25,900 for 2023 returns, an $800 rise, the IRS said.

For single filers and married individuals filing separately, the standard deduction in 2021 returns climbs to $12,550, a $150 increase. The following year, the deduction increases to $12,950, a $400 increase.

These are the standardized deductions taxpayers can take next year. They are also the deduction a taxpayer must beat for it to make sense for a taxpayer to take itemized deductions instead.

For 2021, there is no limitation on itemized deductions. The limitation was eliminated by the Tax Cuts and Jobs Act, the IRS said in a release.

The IRS also set new marginal rates. For tax year 2021, the top tax rate remains 37% for individual single taxpayers with incomes greater than $523,600 ($628,300 for married couples filing jointly). The other rates are:

• 35%, for incomes over $209,425 ($418,850 for married couples filing jointly);
• 32% for incomes over $164,925 ($329,850 for married couples filing jointly);
• 24% for incomes over $86,375 ($172,750 for married couples filing jointly);
• 22% for incomes over $40,525 ($81,050 for married couples filing jointly);
• 12% for incomes over $9,950 ($19,900 for married couples filing jointly).

The lowest rate is 10% for incomes of single individuals with incomes of $9,950 or less ($19,900 for married couples filing jointly).

The annual exclusion on the gift tax rises for the first time in several years. It rises to $16,000 in 2022, with returns filed in 2023. That’s up from 2018 to 2021, when $15,000 was the threshold before taxes applied on gifts, according to the IRS.

“Having a good handle on taxable income for 2022 and 2023 is very important. This drives decisions that should be made in 2021,” Hratch Karakachian, a financial advisor and CPA in Glendale, Calif., told Financial Advisor magazine.

Karakachian said he is telling pertinent clients who can, to consider reducing their tax bills by:

• Taking IRA distributions, including Roth conversions, to take advantage of lower tax brackets;
• Bunching deduction in 2021, including medical, charitable contributions;
• Maximizing per person annual gifts.

The IRS also increased the 2022 alternative minimum tax. “This parallel tax income system requires high-income taxpayers to calculate their tax bill twice: once under the ordinary income tax system and again under the AMT. The taxpayer then needs to pay the higher of the two,” Erica York, an economist with Tax Foundation said.

The AMT is levied at two rates: 26% and 28%. The AMT exemption amount for 2022 is $75,900 for singles and $118,100 for married couples filing jointly.

In 2022, the 28% AMT rate applies to excess alternative minimum taxable income  of $206,100 for all taxpayers or $103,050 for married couples filing separate returns, York said.

AMT exemptions phase out at 25 cents per dollar earned once AMTI reaches $539,900 for single filers and $1,079,800 for married taxpayers filing jointly, York said.

The 2017 Tax Cuts and Jobs Act lowered the rates on most income tax brackets. But bear in mind that these rates, including the top rate, are due to revert to higher rates at the end of 2025, when certain provisions in the Tax Cuts and Jobs Act expire, the Tax Policy Center said.