The Internal Revenue Service (IRS) will begin accepting your tax returns for the year 2023 on January 29th. This year, there are modifications that could result in a slight increase in your funds.
The major focus of this tax season is the effect of inflation on taxes. However, how does this affect you?
According financial experts, there will be a slight increase in people’s paychecks in the year 2024.
The IRS is increasing tax brackets by 5.5%, potentially resulting in a decrease in tax payments or a larger tax refund.
The impact for the majority of Americans will be that if their earnings remain the same or increase by less than 5.5%, they can expect to receive a salary increase this year due to the expansion of the tax brackets.
The standard deduction is on the rise, due to inflation, and has increased by $1,800 to $27,700 for married couples filing jointly compared to last year.
The standard deduction for single taxpayers will increase by $900 to reach $13,850 in 2023.
Many individuals earn minimum wage or a yearly income of $50,000, and as a married couple, they are eligible for a standard deduction of $29,200. This means that even if they own a home and pay real estate taxes, they may not qualify for itemized deductions. The intention of the IRS is to make it easier for more Americans to file their taxes.
One significant alteration for this year is the implementation of tax incentives for electric vehicles.
The major difference this year is that the dealership now offers a federal tax credit of up to $7,500 for purchasing a new car, and up to $4,000 for purchasing a used car, depending on one’s income. Additionally, individuals who install a charger at home may also be eligible for an extra $1,000 credit.
Also, keep in mind that there are tax benefits available for making energy-efficient upgrades to your home.
It is possible to receive up to $3,200 in tax credits if one follows the system correctly. As a result, some individuals have installed new windows and doors but failed to claim the tax credit.
In this current tax season, the IRS is experimenting with their own tax filing software.
The IRS has launched a new program called “IRS direct file” which is a free pilot program. This program will enable taxpayers in 13 different states, such as Arizona, California, Massachusetts, Texas, Florida, and New York, to directly file their taxes online with the IRS at no cost.
Experts are reminder voters it is crucial to closely follow the presidential election if you haven’t been doing so already because your finances are impacted by the outcome. It is important to closely observe the tax policies of both Democrats and Republicans this year. With a national debt of $34 trillion, it is crucial to pay attention to the two main sources of federal revenue: personal income tax and payroll tax. It is advisable to consider the potential impact of these policies on one’s financial future.