Taxes will not disappear even if a new year comes and 2022 goes away forever. Therefore, it is important to catch up on the new updates. It is always advisable to stick to your budget in order to have healthy finances. Your financial situation does not rely just on you, it is affected by the world we live in. That is why it is always important to have a nest egg for future unexpected events.
Not only can tax changes occur when the new year comes, but they could also take place any time during the year and it could affect the past too. Besides, there are state laws and national laws. The main four changes that you will need to be aware of before 2023 are the following ones. The first one has to do with the Internal Revenue Service or IRS changes to thresholds.
They have adjusted the thresholds that have to do with the various federal income tax brackets yearly due to the current inflation. There will probably be bigger changes than in recent years due to the high inflation. Inflation had not been so high for a few decades. It is likely that those who have to pay taxes could change tax brackets in 2023. Some will be able to pay a different tax rate on part of their income.
What is the second change IRS will adjust that affects those who pay taxes?
Next year, IRS will adjust what is known as the standard deduction for individual taxpayers. There will be an increase to $13,850. If you are not an individual taxpayer but a married one filing joint returns it goes up to $27,000. Those heads of households will have theirs in $20,800. Do not forget to claim additional amounts if you are blind or at least 65 years old. It will depend on your filing status though.
Apart from the previously mentioned things related to taxes, IRS will increase the contribution limits for those who have retirement accounts. Bear in mind that 401(k) retirement plans as well as IRAs are on the list. In this way, workers can make up for the skyrocketing inflation in 2022. The fourth need you need to know is that the Earned Income Tax Credit will still be there for those who meet the requirements.
EITC is for those families and workers who have a low to moderate income in order to cut down their taxes expenses. By doing so, these workers or families will receive a higher tax refund. If you would like to know whether you are eligible for EITC you can always check the IRS assistant. Then, you will be able to see the amount of credit you qualify for.