Sneaky ways inflation affects your money in 2023

Inflation has a way of affecting almost every aspect of our finances. Big jumps in tax brackets can save you money, especially if you’re working and your increases — like those of most workers — haven’t kept pace with inflation. Plus, a $2,000 increase in 401(k) limits means you can put away more money for retirement. On the other hand, a huge increase in the maximum income taxed by Social Security means that higher earners will pay more in FICA taxes. If you’re a homeowner, you’ll want to review your coverage because there’s a good chance you’re underinsured.

By now, you are probably familiar with the more obvious ways inflation affects your finances. Your money doesn’t go as much to the grocery store, for example. Credit cards and other variable-rate debt are getting more expensive as the Federal Reserve raises short-term interest rates to fight inflation. Rates are also rising, albeit more slowly, on savings accounts.

But other ways inflation helps or hurts have gotten less attention. Here are some of the key changes to watch out for in 2023.

This undated file photo provided by NerdWallet shows Liz Weston, a columnist for the personal finance website


The IRS raised the standard deduction, which is taken by more than 90% of taxpayers, by $1,800 for married couples filing jointly and by $900 for single filers. The standard deduction amounts in 2023 will be $27,700 for married couples and $13,850 for singles.

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In addition, the IRS adjusted the federal tax thresholds upward by approximately 7%. The larger deduction, higher brackets and other changes mean that many taxpayers will pay less in 2023, especially if their income has not kept pace with inflation.


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