With inflation running near a 40-year high, experts say some major changes are likely to be in store for taxpayers.
Every year, the IRS adjusts many provisions to account for the impact of inflation, ranging from individual tax brackets to how much you can save in your individual retirement account, or IRA.
Taxpayers will also likely see a higher standard deduction in 2023, which could help lower their taxes. The standard deduction is an amount that taxpayers can use to reduce their taxable income, so a boost to this provision could conversely lower the amount of income earned by a worker that will be subject to tax next year.
For instance, take a single worker whose taxable income this year is $40,000. They'll pay 10% of tax on the first $10,275, and then 12% on their earnings between $10,276 and $40,000. FSAs allow workers to put up to that limit in an account that can be used to pay for medical expenses. Because the money is taken from their accounts on a pre-tax basis, it offers tax savings for many workers.