IRS Announces Tax Adjustments – Your Paychecks Will Likely Change Soon

Due to rampant inflation, the Internal Revenue Service announced Tuesday that it adjusted tax code parameters for 2023, meaning many Americans could take home more money from their paychecks next year.

With inflation at a 40-year high, the IRS is increasing the standard deduction by about 7 percent for 2023, The Hill reported.

The standard deduction reduces the amount of income a person is taxing, so by increasing the standard deduction, the adjustment means Americans can protect more of their personal income from basic income tax, the Wall Street Journal reported.

According to Tuesday’s IRS press release, the standard deduction for jointly filed married couples will increase by $1,800 in 2023.

So, married couples will have a standard deduction of $27,700 in 2023. In 2022 it was $25,900.

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The standard deduction for individuals filing alone will increase by $900 to $13,850 in 2023, the IRS reported.

Heads of households will have a standard deduction of $20,800 in 2023, an increase of $1,400 from 2022, the IRS added.

Meanwhile, the IRS also outlined the marginal tax rate class, and “the top tax rate remains 37% for single, single taxpayers with incomes greater than $578,125 ($693,750 for jointly filing married couples).”

The remaining income bracket marginal rates are “35% for incomes above US$231,250 (US$462,500 for married couples filing jointly); 32% for income over $182,100 ($364,200 for jointly filed married couples); 24% for incomes over $95,375 ($190,750 for married couples applying together); 22% for incomes over $44,725 ($89,450 for married couples applying together); 12% for incomes over $11,000 ($22,000 for jointly filed married couples),” the IRS press release said.

Do you think these adjustments are necessary?

These changes, particularly the adjustment to the standard deduction, reflect the severe effects Americans are suffering from inflation and are intended to protect taxpayers from inflationary tax hikes, the Journal reported.

Each year, according to formulas established by Congress, the IRS makes small adjustments to tax parameters to align with the economy and economic forecasts for the following year, the Journal reported.

With inflation so high, the annual adjustment for 2023 is the largest adjustment to the standard deduction since 1985, which was as high as it is now just a few years after inflation.

In 1985, the US Congress indexed tax codes to inflation for the first time.

While the standard deduction is one of the largest tax law changes to date, the IRS also announced smaller changes, such as: B. an increase in employee contributions to flexible spending accounts in healthcare and an increase in the cut-offs for inheritance taxes and annual gift taxes.

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The exclusions for income earned abroad will also be increased for 2023.

All in all, for the average taxpayer, the new year’s change in tax legislation and paychecks should show that the tax deduction is slightly lower and net income is slightly higher.

While Tuesday’s IRS announcement outlined a significant number of tax law changes, more information on tax adjustments is expected in the coming days and weeks since the IRS did not provide information on changes to retirement accounts and contributions to 401(k)s magazine written down.

So Americans can expect more tax code changes that will affect some of their finances in 2023.

https://www.westernjournal.com/irs-announces-tax-adjustments-paychecks-will-likely-change-soon/ IRS Announces Tax Adjustments – Your Paychecks Will Likely Change Soon

Linh

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