Are you ready for it? It’s good news from the IRS!
Last week, the agency released a number of adjustments due to the high level of inflation that everyone has been dealing with for the last year. I won’t go deep into the actual numbers and math involved here but did want to spend some time discussing the overall concept and how this really is good news for everyone.
First, the IRS did not actually adjust tax rates but it did shift the income levels at which established rates start. This is one of those things that automatically kicks in for everyone, hurts no one, and is just an overall bonus for all taxpayers. It could feel like an even bigger break, though, for those who were just over a tax-level threshold that they will no longer reach.
Next, the standard deduction was raised for all filing statuses. Again, this is one of those automatics for everyone and a very quick bonus for anyone taking the standard deduction, because hey, there’s a little more money you have made that won’t be taxed.
These are the two biggest headlines of what the IRS released and if you would like to get a little deeper into how these numbers would play out, you can read this article from Accounting Today. There were also quite a few other little bonuses offered up by the agency that you can find in this second article if you wanted more of the list.
Now for a lot of taxpayers, these new numbers may not add up to giant changes when it comes to the final tax bill. But it’s not going to increase anyone’s, so it’s difficult to complain. However, if you are someone who loves staying ahead of the game and running your expected tax numbers (or would like some help doing so), these are going to change your calculations.
Finally, I just want to caution to keep things in perspective even if this is overall good news. If you make more money this year than last year (which many may be seeing themselves doing if you received a bigger cost of living increase in wages also because of inflation) then you could still pay more in taxes this year than last year. Your expected bill is going to be less now than it would have been at the beginning of the month, but that doesn’t mean it’s going away and planning can keep you from being overly shocked come tax filing season.
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