Tax season is upon us, yet again. Which may be the IRS’s fave time of year…but most people don’t exactly share that sentiment. The silver lining: As Americans have been dealing with record-high inflation (remember those gas prices?), the IRS is helping to offset the impact — with its 2023 tax brackets. Here’s where you’ll stand when you file your taxes this year.
What are the 2023 tax brackets?
Every year, the IRS releases new tax brackets. Mainly to prevent bracket creep
How are the new tax brackets different from past years?
The 2023 tax brackets have bigger changes than the adjustments we normally see.
Example: Let’s look at the changes from 2021 to 2022 for single filers in the 22% tax rate...and then fast forward to 2023.
2021: $40,526 - $86,375
2022: $41,776 - $89,075
2023: $44,726 - $95,375
Clearly, a much bigger jump. And single filers aren’t the only ones who will see such significant changes this year.
So how do I know if I have a new tax bracket in 2023?
There are a few major life changes that may put you into a new tax bracket. Including if…
You’re a newlywed: Tying the knot might mean combined finances, which could land you in a new tax bracket. One way to save on your taxable income: File jointly to enjoy a few tax credits, like the Earned Income Tax Credit. If you file separately, you could still be eligible, but you’ll have a few extra requirements to meet.
Your paycheck changed: A big raise usually lands you in a different tax bracket. (Though the changes to your tax filing are usually small.) On the flip side, if you took a pay cut or just aren't making as much as you used to, you might be in a lower tax bracket compared to previous years. Either way, there are a few ways to keep your taxable income down. Like contributing to a 401(k) or an HSA.
You inherited money: If you got an inheritance, whether it's cash from an IRA or a rental property you own, that technically means you made more money that year. Which also means you'll have to pay taxes on those gains.
We’re all still feeling the impact of inflation. But this time, instead of rising gas prices, it’s rising tax brackets. So don't forget to double check what your 2023 tax bracket will be if you meet any of the criteria above. And make sure you fill out all the right tax forms, too. Happy filing.
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