Big Tax Breaks Await Those Who Plan Ahead This Year
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Here's your money briefing for Tuesday, November 29th. I'm J.R. Whalen for The Wall Street Journal. Between inflation and the topsy-turvy stock market, this has probably been a rough year for your personal finances. And in just a few months, it'll be time to make an accounting of it when you file your taxes. But there are steps you can take now to put yourself in a position to get a tax break next year.
Well, this is very important because really there's very little you can do after the end of the year to affect your taxes for 2022.
Coming up, our tax reporter Laura Saunders will discuss some ways you can reduce your tax bill next year and some important tax changes that you should prepare for now. That's after the break.
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This week, we turn the calendar page over to December, and that means it's a good time to think about getting your tax papers together, not only to be ready for new tax laws coming next year, but also to score some potentially significant tax breaks.
What immediate tax actions should you take before year-end to affect your 2022 return?
Our tax reporter, Laura Saunders, is here with more. Hey, Laura, thank you for being with us.
Well, thanks for having me.
So, Laura, why is it important for people to get a head start and get their papers together in advance?
Well, this is very important because really there's very little you can do after the end of the year to affect your taxes for 2022. There are a few things. You can contribute to an HSA or a Roth IRA or an IRA up until April 18 when you file your taxes. That's the deadline. But you can't make charitable contributions. You can't sell stocks and have it count for 2022. There are just many things you can't do. So you've got to get things done before the end of the year.
All right, well, let's get right into it. Among all the tax changes for the new year, one that will probably affect a lot of people is the standard deduction. Can you tell us about the changes there?
Well, those are very important. Taxpayers get to subtract a certain amount from their taxable income, either the standard deduction, that's one lump sum, or itemized deductions, a whole bunch of things like your medical expenses, your mortgage interest, your charitable deductions, things like that. So more and more people have been moving into the standard deduction for various reasons. And this year, we got a very big bump in the standard deduction because of inflation. For 2022, the standard deduction for a married couple is $25,900. But for 2023, the standard deduction is now $27,700. That's an $1,800 boost, and it's going to put more people into the standard deduction rather than deducting their state taxes and medical expenses and mortgage interest.
Single people are getting a boost as well. They're going from $12,950 to $13,850. So that's a pretty big jump, $900. And then the other thing to remember is that people who are 65 or older, they get an extra standard deduction. In 2022, that's at least $1,400 per person. And 2023, it's at least $1,500 per person.
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