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The New IRS Rules Mean Your Paycheck May Have Just Gotten Bigger

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I’m not even going to pretend to understand the ins and out of the IRS tax rules. That’s why we take our taxes to a CPA.

But, my ears did perk up just a little bit when I heard about these new tax rules that the IRS will be implementing in 2023.

They could amount to a bigger bring-home paycheck for many Americans. OR they may mean you get a bigger tax refund come the 2024 tax season.

Thanks to inflation — we don’t say that a whole lot, do we?!? — the IRS is adjusting their tax rules to reflect the current financial state of the country.

It is very likely that you would see more in your paycheck starting in January [due to the IRS inflation adjustments, which] tend to result in lower withholding for a given level of income.

Mark Luscombe, principal federal tax analyst for Wolters Kluwer Tax & Accounting

How is the standard tax rate changing?

The way things work with taxes, the more you earn, the higher the rate at which your money is taxed.

Now, there are seven different standard federal income tax rates that you might be subject to, depending on how much you earn.

Those rates are as follows: 10%, 12%, 22%, 24%, 32%, 35% and 37%.

BUT, next year, the IRS is making inflation adjustments that amount to roughly a 7% increase to each standard tax rate.

10% applies to the first $11,000 of income for single filers ($22,000 for married couples filing jointly).
12% applies to income over $11,000 ($22,000 for joint filers)
22% applies to income over $44,725 ($89,450 for joint filers)
24% applies to incomes over $95,375 ($190,750 for joint filers)
32% applies to incomes over $182,100 ($364,200 for joint filers)
37% applies to incomes over $578,125 ($693,750 for joint filers)

CNN Business

How is the Standard Deduction changing?

The standard deduction — which MOST Americans claim on their taxes — is also increasing.

That is the amount of money you are allowed to subtract from your adjustable gross income — assuming you don’t claim itemized deductions on your taxes.

This amount “will go up by $900 to $13,850 for single people and by $1,800 to $27,700 for married couples filing jointly.”

How is the Earned Income Credit changing?

According to ITEP, the Earned Income Credit is a policy designed for low-income wage earners. It was created to help struggling families climb their way out of poverty.

Basically, it lets millions of Americans keep more of their paycheck.

The IRS has raised the maximum amounts you can claim under the EITC starting in 2023. This amounts to about a 7% increase.

Every little bit helps, AMIRITE?!?

Now, it is important to note that these IRS rules don’t go into effect until 2023 — which means you won’t see them until you file your taxes in 2024.

But, at least you know they are coming!!

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