You May See More Money In Your Paycheck Next Year - Here's Why
By Jason Hall
October 19, 2022
Inflation may lead to higher paychecks in 2023.
More 2023 wages may be subject to lower tax rates next year than the previous year due to inflation adjustments to the 2023 federal income tax brackets and other provisions announced by the Internal Revenue Service this week, CNN reports.
“It is very likely that you would see more in your paycheck starting in January [due to the IRS inflation adjustments, which] tend to result in lower withholding for a given level of income,” said Mark Luscombe, principal federal tax analyst for Wolters Kluwer Tax & Accounting, via CNN.
The changes aren't expected to take place until mid-April 2023, as they won't affect the 2022 tax return.
Expected major changes made by the IRS include income tax brackets, standard deduction increasing from $900 to $13,850, healthcare flexible spending account contribution limits allowing Americans to contribute up to $3,050 to a flexible spending account and earned income tax credit, which enables low-income workers to keep more of their paycheck.
Inflation remains the top issue among Americans as the annual rate continues to increase to multidecade highs.
An estimated 38% of responding Americans cited the economic issue as the most important problem in the U.S. as part of a poll conducted by Gallup.com.
Economic problems also had the highest percentage in August (37%), July (35%), June (40%), May (37%) and April (39%).
The latest poll coincides with the U.S. inflation rate hitting an 8.2% increase from September 2021 to September 2022, following an 8.3% reading for price increases from August 2021 to August 2022, according to statistics from the Bureau of Labor Statistics released Thursday (October 13) morning via NBC News.
Higher prices for food, shelter and medical care continue to cause the increased inflation totals, according to the data.
President Joe Biden's administration has taken measures to address the issue, including the Inflation Reduction Act, however, provisions in the law will take place during a 10-year period and at least two separate models predict it may not bring statistical significance toward impacting inflation.
The Federal Reserve has already increased its benchmark rate five times in 2022 -- including three consecutive hikes of 0.75% -- in an effort to make borrowing and spending money more expensive to deter consumer demand.