With soaring prices, experts predict larger-than-usual IRS inflation adjustments for 2023 — here’s how it will affect your taxes
may rise to $12.92 million and $25.84 million for single and joint filers, respectively, up from $12.06 million and $24.12 million, Pomerleau predicts."It's going to depend on the taxpayer," Pomerleau said, pointing to different types of income, how much earnings have inflated and which provisions may apply.Higher inflation adjustments may also benefit retirement savers, with larger contribution limits for 401 and individual retirement accounts, Pomerleau said.
While it's too early to predict 401 deferral caps, he expects annual IRA limits to jump to $6,500 for savers under 50, up from $6,000 for 2022. "The jump for the IRA contribution limit is closer to 8% or 9% this year because of the way it interacts with the rounding rule," he said, explaining it adjusts in $500 increments.Despite above-average inflation adjustments for many provisions,"It's a hodgepodge of things that get left out," said certified financial planner Larry Harris, director of tax services at Parsec Financial in Asheville, North Carolina.
While the $10,000 limit on the federal deduction for state and local taxes, known as SALT, will sunset after 2025, the set cap is"having a larger impact in the meantime," he said. However, it's difficult to gauge exactly how much any single provision may affect someone's tax bill without running a 2023 projection, Harris said.