Are you wondering if your tax returns will be bigger in 2023? With the recent changes to the Cost of Living Adjustment (COLA) and the expansion of tax credits, it's a valid question. In this article, we'll explore the potential impact of these changes on your tax returns in 2023 and beyond. The COLA is an annual adjustment to the federal income tax brackets that takes into account inflation. This adjustment is designed to ensure that taxpayers don't pay more taxes than they should due to inflation.
In 2021, the COLA was 2.7%, which resulted in an increase in the income tax brackets for most taxpayers. This means that if you earned the same amount of money in 2021 as you did in 2020, you would pay less in taxes due to the COLA adjustment. In addition to the COLA, several states have taken steps to expand their own child tax credits. This means that if you have children, you may be eligible for additional tax credits that can reduce your overall tax burden.
The combination of the COLA and expanded child tax credits could result in larger tax returns for many taxpayers in 2023. However, it's important to remember that these changes are only temporary and may not last beyond 2023. Therefore, it's important to plan ahead and take advantage of any potential savings while they are available. If you're looking for more information on income taxes, it's important to check with your state to see if they will be sending a tax refund check this fall and find out if you need to pay taxes on forgiving your student loan debt. Additionally, it's important to learn more about the new tax laws on income earned through Venmo or other online payment services. In conclusion, while there is potential for larger tax returns in 2023 due to the COLA and expanded child tax credits, it's important to remember that these changes are only temporary and may not last beyond 2023. Therefore, it's important to plan ahead and take advantage of any potential savings while they are available.
