Are you aware of these tax changes for this coming year?
Did you know that tax laws and regulations change every year? Keeping up with taxes can have a significant impact on your income, so it’s important to stay up to date.
Studies show that roughly one in four Americans don’t know about their tax situation, which can decrease their wealth potential. From increases in 401(k) contributions to changes in the standard deduction, you can maximize your refund by learning about annual tax changes.
1. 401(k) Changes
It’s good practice to invest a portion of your earnings into retirement — not only are you securing your financial future post-retirement, the money you contribute to a 401(k) isn’t taxed. This year, there’s good news for 401(k) investors!
The maximum amount you can contribute to a 401(k) increased to $22,500 this year, up $2,000 from last year. This means that you can put even more pre-tax income into your retirement.
If you aren’t currently investing in a 401(k) or other retirement solutions, we recommend starting with what you can. Investing $1 is infinitely more than investing $0.
2. IRA Changes
Traditional IRAs and Roth IRAs are also seeing an increase in the maximum amount you can contribute. For 2023, the maximum will rise to $6,500 — a $500 increase over last year.
These changes are great news, allowing you to take advantage of tax-free income to build more wealth for the future. If you’re planning to change investment amounts or start investing, be sure to consider contacting a financial advisor.
Hot Tip: Are you currently investing in your retirement? Make sure to take advantage of all of the benefits for 2023!
3. Standard Deduction Changes
For most Americans, claiming the standard deduction is the go-to approach to filing taxes. There’s good news for those that take this approach because the deduction amounts have increased.
The amounts are: $27,700 for married couples filing jointly (up from $25,900 last year), $13,850 for single filers and married individuals filing separately (up from $12,950 last year), and $20,800 for heads of households (up from $19,400 last year).
4. HSA Changes
If you’re enrolled in a HSA (Health Savings Account) there’s good news: HSA contributions are being increased along with other retirement accounts.
The maximum contribution for individuals is now $3,850, up $200 from last year, and for families, it’s now $7,750, up $450.
These increases help the majority of Americans — the reason for these increases is adjustment to rising inflation rates over the past year.
Be sure to either consult with a tax professional or read up on all of the other changes before filing your taxes for 2023!