New IRS rules mean your paycheck could be bigger next year

Inflation can drive prices up, but it can also help increase your net pay from next year onwards.

Thanks to inflation adjustments to federal income tax brackets for 2023 and other provisions announced this week by the Internal Revenue Service, more of your salary in 2023 may be subject to lower tax rates than that year, and you may be able to deduct higher amounts of income.

“There’s a good chance you’ll start seeing more on your paycheck by January [due to the IRS inflation adjustments, which] tend to result in less withholding at a given income level,” said Mark Luscombe, senior federal tax analyst at Wolters Kluwer Tax & Accounting.

Since the changes will not apply until 2023, they will have no impact on Your 2022 tax return, which you must submit by mid-April next year.

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Here are some of the big changes made by the IRS power:

There are seven different federal income tax rates at which earned income is taxed: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. And the range of income that is subject to each of these rates is called a tax bracket.

The more you earn, the higher your “top rate” — that’s the rate at which your last dollar is taxed.

The IRS inflation adjustments add up to about a 7% increase in each notch.

From next year, the following income amounts will apply to the individual rates:

10% applies to the first $11,000 of income for a single person ($22,000 for married couples applying together).

12% applies to income over $11,000 ($22,000 for joint applicants)

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22% applies to income over $44,725 ($89,450 for joint applicants)

24% applies to income over $95,375 ($190,750 for joint applicants)

32% applies to income over $182,100 ($364,200). for shared filers)

37% applies to income over $578,125 ($693,750 for joint applicants)

The standard deduction, which most applicants claim, will increase by $900 to $13,850 for single people and by $1,800 to $27,700 for married couples applying together.

The standard deduction is the dollar amount that those who do not report deductions can deduct from their gross adjustable income before federal income tax is assessed.

Next year, you’ll be allowed to put up to $3,050 into a flexible spending account that can cover some health care expenses that aren’t covered by health insurance. This money is deductible, so it reduces the amount of tax that is deducted from your paycheck. If your employer’s plan also allows you to carry over unused portions of your FSA amount, the maximum allowable carryover is $610, $40 more than this year’s maximum.

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That Earned Income Tax Credit (EITC) enabled Low-income workers to keep more of their paycheck. However, they will not get the money paid out by They file their 2023 taxes in early 2024.

The IRS raised the maximum amounts can be claimed for the EITC by approx. 7%.

For example, an eligible taxpayer with three or more eligible children could receive an EITC of up to $7,430 in 2023, up from $6,935 this year.

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