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The cost of living adjustments the IRS makes for 2023 are expected to be higher than they've been in decades — and could lower your taxes next year.
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How inflation could lower your taxes
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How inflation could lower your taxes
The cost of living adjustments the IRS makes for 2023 are expected to be higher than they've been in decades — and could lower your taxes next year.
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How inflation could lower your taxes
Why it matters:
Cost of living adjustments (COLAs) on taxes, Social Security payments and wages were barely noticed in the era before high inflation.
But now they're crucial for Americans coping with record price increases.
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What's happening:
The IRS adjusts tax brackets yearly to ward off "bracket creep" — when your salary rises to keep up with inflation, propelling you into a higher tax bracket.
It'll likely announce the 2023 adjustments at the end of Oct. or early Nov. trib.al/LTKJUpi
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Every year, the IRS adjusts the tax code to prevent pushing taxpayers into higher tax brackets.
Due to record high inflation, tax parameters will increase by more this year than they have over the past decade, says . Via :
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The impact:
Taken together, these changes could mean more take-home pay even if your salary doesn't change from Dec. 2022 to Jan. 2023 (assuming no other changes to withholding).
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There are a handful of parameters that are not adjusted, such as the net investment income tax income thresholds. This is fixed at $200,000 ($250,000 married filing jointly) in AGI.
Inflation is bad news for taxpayers potential impacted by that tax.
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