In this new year 2023 the citizens of the United States could have a lot of reasons to celebrate in terms of taxes and salaries. The income tax for a large portion of Americans will change a bit due to new features introduced by the IRS. As the year enters, new tax brackets and standard deductions have gone into effect.
This could make for an overall pay raise and lower income tax. Thus, the big picture is that the IRS has made some changes because of inflation. Among those changes is an increase in the contribution limit for tax-deferred retirement plans in 2023. In addition to that, there is also a 3-cent increase to the mileage rate.
As for the high limits for 401(k) plans, the good news is that this tax drop helps save a lot of folks. Ultimately, this will end up being a big help because of the IRS income tax reduction.
When will these IRS tax changes start to be noticed?
These changes will begin to be noticed on tax returns filed in 2024. The IRS also changed the withholding tax tables in 2023. This means that there are now also changes to the money that employers must withhold from their employees. This is really important for a large portion of American citizens.
Keep in mind that in these years of inflation, any change that increases the monthly paycheck is vital. That is why it is so important for workers to be able to count on that small pay raise, even if it means a lower tax payment. At the end of the day, more often than not, this means a tax refund next year.
Therefore, if the payment in tax is lower and the income refund is also lower, the citizen can distribute the money more steadily.
Tax reduction in 2023
As they comment in Axios, there are tax deductions and tax reduction for the year 2023 by the IRS. This will be a complete change for many U.S. citizens. On the one hand, we should keep in mind that if a citizen earned in 2022 $90,000 the tax rate was 24%. This changes in 2023 to 22%.
So we are looking at a very interesting change to see a marked improvement in all things tax related for Americans. At a time when inflation is so pervasive and increases so much, something like this is most encouraging.