The price at the pump is not the only thing predicted to impact taxpayer wallets. Before the 2022 filing season has even hit, predicted tax brackets for 2023 already are a topic of conversation.
Thankfully, most of the predictions center around raising the basis for brackets and deductions. Bloomberg Tax predicts that the earnings base, as well as income limits for popular deductions, should all see an average increase of 7.1% to account for inflation. That’s more than double what we saw in 2022.
The full Bloomberg report can be found HERE.
Advisors want to stay on top of rate changes, as well as changes in the earnings base and deduction income limits. Even a small shift can cause a taxpayer to go from being eligible to being ineligible for a tax deduction or vice versa. In some cases, shifts in calculation bases are almost $10,000. Changes that large can affect multiple clients.
As advisors, our clients look to us to avoid surprises on their returns. If a client is over a bracket by a minimal amount, we can help them plan now for what options they have to reduce their taxable income. The same strategy applies any time earnings base amounts are adjusted.
The Bloomberg report also accounts for the already enacted changes from the Inflation Reduction Act.
To ensure you’re providing the best year-end planning advice to all your clients, ensure your tax software is up to date, or use a planning tool like Tax Planner Pro. Older software versions typically do not encompass changes to the tax laws for the coming year.