Not all money is taxed the same. Most Americans may not know this, but the IRS uses tax brackets to tax the income that it deems taxable. These tax brackets determine the rate at which each dollar of income is taxed and are periodically adjusted upward to reflect the rising cost of living. This is so that those whose income keeps up with the cost of living do not end up in a higher tax bracket being penalized while not earning Comparatively More Money.

The Adjustments The IRS Has Made To Tax Parameters

To aid in that regard, standard deductions, which allow taxpayers to reduce their taxable income, were also increased for all filing statuses. Itemized deductions will stay the same, but since the quantities to deduct will probably have risen, the effect is maintained the same.

Other changes made include those to the Earned Income Tax Credit, a refundable tax credit designed to help low- and moderate-income families. The new year will bring an increase in refunds to help these working families. Most of the families who qualify have children, which can make some think that you must have children to qualify, but some families without children may still fulfill the conditions. To qualify for this credit, you must:

• Have worked and earned income under $63,398
• Have investment income below $11,000 in the tax year 2023
• Have a valid Social Security number by the due date of your 2023 return (including extensions)
• Be a U.S. citizen or a resident alien all year
• Not file Form 2555, Foreign Earned Income
• Meet certain rules if you are separated from your spouse and do not file a joint tax return.