The choices you make now and at the end of the year can significantly affect the taxes you have to pay next April. This is especially true for those who save for retirement, itemize deductions, or have investments outside of a retirement plan.
A word of caution to high earners and supersavers: Your gigantic 401(k) or conventional IRA, which you worked so hard to accumulate, might become a significant problem in retirement, resulting in enormous tax payments and Medicare surcharges.
Because taxpayers and their advisers did not anticipate this rule, and because the regulations have not yet been finalized, many beneficiaries are unlikely to take the required withdrawals.
The Internal Revenue Service increased the standard deduction and the income levels at which tax rates become applicable for 2023 to account for rising inflation.
Higher inflation is predicted to enhance the Social Security cost-of-living adjustment, or COLA, in 2023 by a percentage not seen in forty years. This might be interpreted as good news for seniors struggling with rising expenses. The poor part? This substantial increase might drive Social Security users into higher tax categories, resulting in almost half of all households paying taxes on their payments.
Congress is considering legislation that would turn the Saver’s Credit into a government matching program for retirement plan contributions.