Robert Gonzales, Pure Financial Tax Planner, focuses on a few key points of the changes to the 2023 tax code.
FREE GUIDE | End of Year Tax Strategies
Tax season is right around the corner and I’m here to let you know about the thousands of inflation adjustments the IRS has made for the current year! Don’t worry: In the interest of time, I’ll focus on just a few key points.
First, you might be in a lower tax bracket this year. Even though the tax rates stay the same in 2023 at 10, 12, 22, 24, 32, 35, and 37%, the amount of income needed to reach each bracket has increased.
Because of high inflation this year, the income that sets the boundaries of the tax brackets has increased a lot more than it has in prior years.
Additionally, the standard deduction has increased by $900 for single filers and $1,800 for married filers, meaning a large amount of your income may not be subject to tax at all. You may notice an increase to your take-home pay beginning next year because of these expanded brackets.
If you choose to save some of that extra money, you can also benefit from other inflation-based changes occurring for 2023: retirement contribution limits are increased.
For people under age 50, 401(k) contributions may be up to $22,500 in 2023, which is a $2,000 increase. For people age 50 and older, the limit increases to $30,000 from $27,000.
Also, IRA contributions may be $6,500 for those under age 50, and $7,500 for those 50 and up.
The income limits for deducting traditional IRA contributions and making Roth contributions are also increased. HSA contribution limits are also up: $3,850 for individual coverage and $7,750 for family coverage.
Many other phase-outs, phase-ins, brackets, ranges, and limits have been updated for the current year, that may affect you! If you have any tax questions, go to IRS.gov and get all the info.
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