Are you aware of these tax changes for this coming year?
Did you know that tax laws and regulations change every year? These changes can have a significant impact on your income, so it’s important to stay up to date.
Studies show roughly one in four Americans don’t know about their tax situation — this can actually decrease their wealth potential.
With tax season coming up soon, here are four important tax changes you should be aware of before filing.
1. 401(k) Changes
It’s good practice to be investing part of your earnings into retirement. This year, there’s good news for 401(k) investors!
The maximum amount you can contribute to your 401(k) increased to $22,500 this year. That’s a $2,000 increase from last year! This means you can put 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 $0.
2. IRA Changes
Along with increases to the amount you can contribute to your 401(k), traditional and Roth IRAs are seeing increases to the maximum contribution level.
For 2023, the maximum will rise to $6,500 — a $500 increase over last year.
Hot Tip: Haven’t started investing in retirement? It’s always better late than never to start – check out our investment resources to learn more!
3. Standard Deduction Changes
For most Americans, claiming the standard deduction is the way to go. If that’s you, we have good news: the deduction amounts have increased.
Deductions reduce the amount of your income on which you’re taxed. An increased standard deduction puts more money into your wallet.
In 2023, the standard deduction 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)
- $20,800 for heads of households (up from $19,400 last year)
4. Health Savings Account (HSA) Changes
If you are enrolled in a Health Savings Account (HSA) 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. For families, it’s now $7,750, up $450.
Bottom Line
The increases highlighted above adjust for the rising inflation rates this past year. Larger maximum contributions for retirement funds, HSA contributions, and standard deduction amounts will help the majority of Americans pay less taxes.
Be sure to either consult with a tax professional or read up on all of the other changes before filing your taxes for 2023!
