Impact of Tax Changes on Gen Z and Millenials (Photo: Penn Medicine)
As millennials and Generation Z prepare to file their taxes this year, they may wonder if there are any tax changes they should be aware of. The IRS has announced a few tax return changes, such as new tax brackets for 2023, which may increase or decrease tax refunds.
The best advice for millennials and Generation Z is to prepare before filing.
Standard Deduction Amounts Increase
The IRS announced in October 2022 that tax inflation adjustments would be made for the 2023 tax year.
The increase is broken down below by Lisa Wood, CPA and director of tax at Buckingham Advisors.
- Single filers: $12,950
- Head of household filers: $19,400
- Married filing jointly filers: $25,900
READ ALSO: How to Get Rich in a Gen Z Era?
Impact of Tax Changes on Gen Z and Millenials (Photo: MarketWatch)
SECURE 2.0 Retirement Changes
President Joe Biden signed SECURE 2.0 into law on December 29, 2022. This legislation has resulted in significant changes to retirement savings plans. In comparison, many of these tax changes are intended to benefit employers and employees.
Contributions to Retirement Should be Increased
According to the IRS, total contributions to traditional IRAs and Roth IRAs for those under 50 will increase to $6,500 in 2023. Previously, the total contribution limit for these accounts was $6,000 per year. Similarly, increases in 401(k) plans have been announced. Individuals can contribute up to $22,500 to their 401(k) in 2023, a significant increase from the $20,500 contribution limit in 2022.
New Electric Vehicle Tax Credit
This might apply to millennials and Gen Zers if they purchase a new electric vehicle (EV) in 2022. These tax changes lead to a credit that is nonrefundable and is worth up to $7,500.
Reduced Tax Liability
When Millennials and Generation Z file their taxes this year, they may notice that their liability for the 2023 tax year is less than it was in 2022. Colleen Carcone, director of wealth planning strategies at TIAA, explained that if your tax bill decreases, it is because 2023 inflation-adjusted tax figures have increased.
Don’t Delay Filing Your Taxes!
There are additional aspects of tax filing that millennials and Gen Zers may need clarification on, such as what to do if they purchased cryptocurrency or how to navigate side hustle tax forms. Those unsure about filing on their own should consult a tax filing professional. An accountant or CPA can help you with any questions and ensure you take advantage of these valuable tax changes.
READ ALSO: 2023 Major Tax Changes to Affect Refundable Amount
