With the new year comes a new set of income tax brackets. Understanding 2023 income tax brackets can feel overwhelming, but it doesn't have to be. Knowing your options and understanding the structures will help you plan ahead and be prepared for next years tax season. Let's break down what you need to know about 2023 income tax brackets, so you can make educated decisions come time to file your taxes.
What Are Tax Brackets?
Tax brackets are simply systems that help governments determine how much tax an individual or business should pay based on their total taxable income for the year. The higher your taxable income, the higher your tax rate becomes. This method is used to ensure that those individuals making a larger amount of money are paying their fair share in taxes compared to those making less money and taking advantage of deductions and exemptions available each year.
How Do I Know Which Bracket I Fall Into?
In order to know which bracket you fall into, you must first calculate your total taxable income for the year. Your total taxable income is made up of all sources of taxable income, including wages, salaries, capital gains, interest earned, dividends earned, etc., minus any deductions or exemptions that may apply in your situation. Once you have calculated this number, it will give you an indication as to which bracket you will be placed in when filing your taxes in April 2024.
What Can I Do Now To Lower My Taxable Income?
Fortunately there are many things you can do now to lower your taxable income come April 2023. One way is by taking advantage of retirement savings plans such as 401(k)s and IRAs which allow individuals to save money pre-tax and lower their overall taxable income for the year. Additionally, contributing regularly to a health savings account (HSA) also provides ways for individuals to save money pre-tax while also potentially reducing their out-of-pocket costs related to medical expenses throughout the year. Other actions include consulting with professionals such as our team of Certified Tax Professionals who are able to provide more specialized advice specific to your situation on how best reduce your total yearly taxable income before filing taxes next April. Click Here To Book a Free 10 Min Call!
It is important that taxpayers understand where they stand now with respect to understanding 2023 tax brackets so they are prepared come April when filing taxes becomes due again. By understanding what these brackets mean and how they could affect one’s overall financial status throughout the following year can help individuals make informed decisions when planning ahead financially both now and in future years as well! Taking steps now such as utilizing retirement savings accounts or consulting with professionals may be beneficial in helping taxpayers lower their total yearly taxable incomes which could potentially save them considerable amounts of money come tax season next April!