The IRS has released higher federal tax brackets for 2023 to adjust for inflation.
The standard deduction is increasing to $27,700 for married couples filing together and $13,850 for single taxpayers.
There are also changes to the alternative minimum tax, estate tax exemption, earned income tax credit and flexible spending account limits, among others.
IRS raises income threshold and standard deduction for all tax brackets. Amid soaring inflation, the IRS this week announced higher federal income tax brackets and standard deductions for 2023.
The agency has boosted the income thresholds for each bracket, applying to tax year 2023 for returns filed in 2024.
These brackets show how much you’ll owe for federal income taxes on each portion of your “taxable income,” calculated by subtracting the greater of the standard or itemized deductions from your adjusted gross income.
Higher standard deduction
The standard deduction will also increase in 2023, rising to $27,700 for married couples filing jointly, up from $25,900 in 2022. Single filers may claim $13,850, an increase from $12,950.
More from Year-End Planning
Here’s a look at more coverage on what to do finance-wise as the end of the year approaches:
The IRS also boosted figures for dozens of other provisions, such as the alternative minimum tax, a parallel system for higher earners and the estate tax exemption for wealthy families.
There’s also a higher earned income tax credit, bumping the write-off to a maximum of $7,430 for low- to moderate-income filers. And employees can funnel $3,050 into health flexible spending accounts.
While the agency hasn’t yet released 2023 limits for 401(k) and individual retirement accounts, experts predict IRA limits will jump to $6,500 for savers under 50.
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Fall is a time of leaves changing colors, children going back to school, families enjoying Thanksgiving dinners, and… open enrollment. Yes, it’s the opportunity for most employees to select which benefits they will choose for the following year. Here are some of the most common mistakes we see people make:
Not fully understanding the value of an HSA-eligible health insurance plan.
HSA-eligible high deductible health plans tend to come with lower premiums (what you pay per month or paycheck for your coverage) but higher deductibles (what you pay out-of-pocket before most of the insurance benefits kick in) than more standard health insurance plans. In addition, they make you eligible to contribute pre-tax dollars (for 2023, up to $3,850 for individual coverage or $7,750 for family coverage plus $1,000 if you’re turning 55+) to an HSA (health savings account) that can be used tax-free for qualified medical expenses at any time.
While it’s easy to compare the difference in premiums and deductibles, don’t forget to factor in the value of the HSA. First, many employers will actually make contributions to your HSA for you. That’s free money! If you contribute on top of that, you also get a break on your taxes (including FICA if you contribute from your paycheck).
For example, I spoke with an employee who would save almost $1,900 a year in premiums by choosing the high deductible health plan. In addition, he would receive $1,000 in his HSA from his employer and would save almost another $2,000 in taxes by contributing another $6,000 to the HSA. The $4,900 in total savings dwarfed the difference in deductibles.
Under or over funding an FSA.
FSAs (flexible spending accounts) let you put money away pre-tax that can be used tax-free for health (up to $3,050 per person next year) or dependent care (up to $5,000 per family next year) expenses. If you’re in the 24% tax bracket, that’s like getting a 24% discount on those eligible expenses! Not taking full advantage of these accounts could cost you hundreds or even thousands of dollars in lost tax breaks.
However, there is a catch. Unlike HSAs, FSAs are mostly “use it or lose it” so you don’t want to contribute more than what you’re pretty sure you can spend. (Having a general health care FSA also precludes you from contributing to the more valuable HSA in the same year.) If you do end up with extra money in the account at the end of the year, try to use it by stocking up on qualified supplies like contact lenses and prescription drugs. You can find FSA-eligible items here.
Not taking advantage of a prepaid legal plan.
Do you have updated estate planning documents like a will, durable power of attorney, advance health care directive, and living trust? If not, you can save a lot of money by using your employer’s prepaid legal service to have these documents drafted or updated. You pay a fee per paycheck, but the legal services are free or heavily discounted. You can then choose not to renew it the following year after you’ve gotten your documents in place.
Ignoring disability insurance.
Disability insurance is often overlooked even though about 25% of 20-yr olds are likely to be out of work for at least a year due to a disability before they reach normal retirement age. If your employer doesn’t provide it, you may want to purchase it. The good news is that employee-paid disability benefits are tax-free.
Not having enough life insurance.
Your employer may offer you life insurance coverage equal to one or more times your salary, but you may want to purchase supplemental life insurance if you have dependents. You can use this calculator to estimate how much you need. Then compare the cost of purchasing it through your employer with the cost of a term policy in the individual market. (See if your coverage at work can be converted to an individual policy once you leave the job.)
Your benefits can be a significant part of your total compensation and open enrollment can be your only chance to take full advantage of many of them. When in doubt about your selection of benefits, find out if your employer offers a financial wellness program with free guidance and coaching from unbiased financial planners who are trained on your particular benefits. Then go and enjoy the holidays knowing that your family is protected.
I’m a Senior Resident Financial Planner at Financial Finesse, primarily responsible for providing financial education and guidance to employees of our corporate clients. I also
Many young, single people assume they don’t need life insurance. Unfortunately, this misconception is difficult to reconcile before it’s too late. After all, life insurance is one of those investments that you can’t exactly buy after you need it, and if you wait too long, it’s going to cost a lot more to get it.
The purpose of life insurance is to provide a safety net so your family or loved ones won’t struggle to pay bills or handle other financial responsibilities after you’re gone—but that doesn’t mean you don’t have to think about it until after you have a family. Here’s what you need to know about that and other myths about life insurance that are best ignored, and what facts to consider instead.
Life insurance only matters after you die
In fact, life insurance is for the living. It’s in the name, and sure, the central reason to get life insurance is to financially protect your loved ones in the event of your death. But many life insurance policies also have living benefits, which allow you to tap into your plan in the event you are diagnosed with a terminal or chronic illness.
Another way you can benefit from your life insurance your plan while you’re still alive is through its cash value. Depending on your plan type, you may be able to build tax-deferred wealth through your policy, with the ability to make withdrawals from or take out loans against the value during your lifetime.
All life insurance is too expensive
Life insurance costs will vary depending on your age, gender, health, and specific policy. Predictably, the younger and healthier you are, the less expensive life insurance will be. For example, a healthy 35-year-old can pay under $28 per month for a term life insurance policy with a $500,000 death benefit payout and a duration of 20 years, according to Policy Genius.
If you’re concerned about costs, Business Insider advises you to start small. Get as much life insurance as you can afford for now, and then reassess when you are able to increase your coverage down the line. For your first plan, term life insurance is one of the most popular and affordable options. It’s a straightforward policy that provides a large assured sum assured for a low premium over an extended term, typically 10 to 30 years.
If you have health issues, consider looking into policies that don’t require medical exams.
You don’t need life insurance if you’re single with no dependents
This might be the most prevalent myth about life insurance: If no one is depending on you, why create a financial security blanket? The reality is that if you have transferable debt, like student loans, you could render your parents or other family members responsible after you’re dead. Life insurance is not just for married couples.
And while many think of life insurance as replacing lost income, even a stay-at-home parent who doesn’t receive a salary should take out life insurance. Although they may not be the traditional “breadwinner,” the cost of replacing childcare or other household duties is worth considering, and preparing for.
You should just stick with your employer’s life insurance
While many company life insurance policies are a low-cost (or even free) perk, they likely aren’t sufficient to meet your financial needs, typically offering around a year of your usual salary. Investopedia explains: “If you have dependents who rely on your income, then you probably need coverage worth at least six times your annual salary…Some experts even recommend getting coverage worth 10 to 12 times your salary.” It’s wise to supplement employer-provided insurance benefits with policies that are tailored to your needs.
The bottom line: Life insurance is not one size fits all
Take advantage of the fact that life insurance is highly customizable. And compared to other forms of insurance, your life insurance needs will change drastically over time. Think about it: Children, marriage, divorce, remarriage, caring for elderly family members, and retirement…and that’s just your thirties. (Kidding.)
Even if you don’t think you need it now, you should start with what you can afford and build coverage as your circumstances change. Nerd Wallet provides a handy table that will help you compare quotes now, and companies like Policy Genius make it easy to shop around for a good rate. But rather than rely solely on online platforms, it’s also worth consulting a real life professional.
Pinterest wants a lawsuit brought by a woman claiming to be an uncredited cofounder dismissed, saying she played no role in the company’s start.
Christine Martinez, who has long operated as a popular influencer on Pinterest, originally filed against Pinterest in September, alleging breach of implied contract, idea theft, unjust enrichment and unfair business practices. Martinez maintains she helped the company’s acknowledged founders Ben Silbermann and Paul Sciarra get Pinterest going in 2009 when the two were shifting focus from a shopping app to what became the social media company.
Pinterest went public in 2019, and its stock has proposed during the pandemic as more users browsed its app while at home. Silbermann remains the company’s CEO. Sciarra left soon after the company began. Both still hold lucrative stakes in the company worth more than $1 billion.
In a new legal filing in California Superior Court, Pinterest further presses for dismissal by arguing that Martinez waited too long to bring this up, her claims falling outside the statutes of limitation. Martinez hasn’t specified exactly how much she thinks she’s entitled to, though a stake in Pinterest similar to Silbermann’s and Sciarra’s would be worth over a billion dollars.
It’s unclear why Martinez waited more than a decade to press her claims, while former and current employees at Pinterest have said they have little to no recollection of her. She is not described in any previous news coverage of the company as a cofounder, and in her 2012 book how to succeed on Pinterest, The Complete Idiot’s Guide to Pinterest Marketing, she describes herself only as an “early adopter.”
The battle between Martinez and Pinterest is made complicated by several things. While she may or may not have been a cofounder, what’s clear is that she and Silbermann were once friends, reportedly close enough to appear in Silbermann’s wedding party. Further, Pinterest was hit last year by complaints from several employees that it mistreated female staff and people of color.
Last month, it pledged to spend $50 million on diversity initiatives within the company, ending litigation brought by Pinterest shareholders. In 2020, it agreed to pay $22.5 million to former Chief Operating Officer Françoise Brougher, who had brought a case alleging racial and gender discrimination.
I’m a senior editor at Forbes, where I cover social media, creators and internet culture. In the past, I’ve edited across Forbes magazine and Forbes.com.
Pinterest has settled a lawsuit brought against it by shareholders who claimed that the company’s workplace discrimination against women and racial minorities hurt its reputation, according to NBC News. The company reportedly agreed to spend $50 million on improving its diversity and equity, and will let former employees talk about racial or gender discrimination they experienced, even if they were bound by a non-disclosure agreement. Other financial details of the settlement weren’t disclosed.
The lawsuit was filed against the company’s executives in November 2020, with shareholder claiming that the company was acting irresponsibly by doing nothing to address “widespread claims of race and gender discrimination.” The complaint also accused the company’s CEO of “surrounding himself with yes-men and marginalizing women who dared to challenge Pinterest’s White, male leadership clique.”
That year, multiple women reported that Pinterest paid them less than male employees, and some reported racial discrimination and retaliation for speaking out. The Verge also reported on discrimination within the company’s finance team. Separately, the company paid out $20 million to its former COO Françoise Brougher after she alleged that the company paid her less than male colleagues, didn’t invite her to important meetings, and fired her after she brought up the issues.
For employees, it’s not pumpkin spice season right now, it’s Open Enrollment season. That means it’s time to make the health and retirement plan choices that will be right for you in 2022.
It isn’t easy, and many workers feel uneasy about choosing wisely. In its 2021 State of Work in America survey of 1,500 U.S. employees, the professional services firm Grant Thornton found that 36% of workers weren’t confident they’d chosen the best medical plan. And 80% of employees surveyed by Lincoln Financial said they wish they better understood some aspect of their retirement plan.
Employees can expect to see rising out-of-pocket health costs through their employer coverage in 2022, including premium increases of 4% to 5%. Some higher-paid workers will be asked to pay more for their health insurance than lower-paid workers. Roughly a third of employers surveyed by the benefits consulting firm Willis Towers WLTW+0.1% said they’d consider narrowing the network of doctors and other health care providers available to patients.
But you may be in for a few pleasant surprises.
“As employers continue to compete for talent, many are adding a number of new benefits to their lineup for next year including resources and additional paid leave for caregivers, surgery Centers of Excellence [more on this below], financial planning and expanded mental health benefits, virtual physical therapy and other digital health programs,” says Erin Tatar, senior vice president of workplace consulting at Fidelity Investments.
Some employers have added an emergency savings account option through payroll deductions, too. About 23% of employees are currently offered one, according to the Employee Benefit Research Institute.
Tatar’s advice: “Take time to attend virtual benefits fairs to review the growing list of health, wealth and other benefits from your employer this fall.”
Getting the Right Health Coverage
For many older workers, access to affordable health care coverage is the No. 1 employee benefit they seek. Before you enroll in a health plan for 2022, ask yourself: How much did I pay in premiums this year? How many trips to the doctor, hospital or emergency room did members of my household make? What else did we spend out-of-pocket for health care in 2021?
Then, start comparing the features and prices of your options, since they can vary significantly. Compare the benefits, rules, restrictions and costs such as co-pays, annual deductibles and out-of-pocket maximums. You may well need to deal with Alphabet City, deciding among a high deductible health plan (HDHP) with a health savings account or HSA (an HSA lets you save money in a tax-advantaged account and then withdraw cash tax-free to pay for qualified medical expenses), a health maintenance organization (HMO) plan and a preferred provider organization (PPO) plan.
Don’t assume that whatever health plan and benefits you had in 2021 will be the best for you in 2022. Your plan may have changed. Your circumstances may have changed; for example, if your last son or daughter is now in college, it might make sense to buy a university plan for that child while you and your spouse change from family coverage to “employee + 1” coverage.
And don’t miss out on the panoply of health benefits in your plan choices, especially new benefits that can save you money.
“An often-overlooked benefit for older workers is a surgery Centers of Excellence program,” says Tatar. Here, if you are planning to have surgery — such as spine, knee, hip or bariatric surgery — the company will arrange for you to receive care from a Center of Excellence to receive top notch and affordable treatment.
“They will often provide more generous benefits coverage for patients who participate and will cover any upfront travel costs for you and a companion if the best care is outside your community,” Tatar notes.
If you’re in good health, says Seth Mullikin of Lattice Financial in Charlotte, N.C, “an HSA (with a high deductible plan) generally makes sense. From a financial planning perspective, it gets better if you can fund these costs from personal savings and let your HSA money grow tax-free over time.”
The HSA also lets you pay for health expenses in the future, even into retirement, adds Mullikin. In 2022, employees with high-deductible health plans will generally be allowed to contribute up to $3,650 in an HSA; as much as $7,300 for family coverage.
Time for a Second Opinion?
You may also be able to sign up to get a second opinion as part of your health coverage. Some employers have even expanded eligibility to receive a second medical opinion for an employee’s parents and grandparents.
“As we get older, the risk of having a serious health event increases. If this happens to you, it’s natural to seek a second opinion. Some employers we are working with now want to give employees better peace of mind, so they offer ‘second opinion’ benefits,” notes Tatar. “Then they can provide an entire medical diagnosis and treatment plan as an option for you to discuss with your doctor. And it is usually covered one hundred percent.”
Mental Health Coverage
The pandemic and revelations by star athletes including tennis’ Naomi Osaka and gymnastics’ Simone Biles, has made taking care of our mental health a priority.
More than three-quarters of large employers surveyed by the nonprofit Business Group on Health say access to mental health care is now a top priority. In 2021, 62% of employers this group surveyed added mental health benefits.
To that end, check to see if your employer is incorporating resiliency and mindfulness training and mental health options such as telehealth counseling into its benefits offerings.
Disability Coverage
You may also want to look into getting disability insurance coverage through work.
“Your chance of being disabled is much greater than the risk of premature death,” says wealth adviser Graham Ewing of Financial Consulate in Hunt Valley, Md. “If your employer is offering disability insurance, consider it.”
But, he adds, “you need to understand how disability is being defined by the insurance company. For example, some policies will pay out benefits for only two years if you can’t do your current job. Others won’t pay beyond two years if you are not completely incapacitated. So, find out what’s covered and what’s not.”
Group disability coverage typically pays up to 60% of salary if you can’t keep working at your job or switch to another position and you expect to be disabled for a year or more.
Care Giving Benefits
If you are caring for an aging loved one or someone with a serious illness, inquire about work/life balance or employee assistance programs. Some companies are now offering caregiver navigation benefits which connect you with experts to help find local elder care resources or options for assisted living or nursing homes.
If you’re a caregiver, you’ll likely need some give and take with your schedule, so see what HR will do for you.
Says Tim Glowa, a principal and leader of Grant Thornton’s employee listening and human capital services offerings: “Everyone has a unique set of responsibilities outside of the office. As companies return to the office, it will be more crucial than ever to give people the time they need to take care of what’s important at home.”
Financial Wellness and Retirement Planning
Open Enrollment season may also be a good time to revisit your retirement plan and do a “financial check-up,” similar to getting an annual wellness physical from your doctor, says Ewing.
“You may want to revisit your risk tolerance, especially if you are concerned about gyrations in the stock market,” he adds.
Mullikin notes that many of his 50+ clients are worried about having enough money to retire comfortably. “So, our first order of business is to find out if they can increase, or max out, their 401(k) contributions,” he says.
Another way to save more for retirement when you’re over 50 is to make catch-up contributions to your retirement plan.
These let you put in up to $6,500 more than others can in a 401(k) or 403(b) plan or up to $1,000 in an Individual Retirement Account. “Plus, you and your spouse (if they are also enrolled) can make catch-up contributions of up to a thousand dollars to your HSA at age fifty-five,” notes Mullikin.
Reimbursing Your Remote Work Expenses
If you’ll be working remotely in 2022, even part of the time, check with your HR department about getting reimbursed for home office expenses like a standing desk, a Wi-Fi extender, a headset and any ergonomic equipment designed to keep you healthy and productive.
About a fifth of employers the benefits consulting firm Mercer surveyed said they’d be adding or enhancing reimbursement for off-site workers in 2021, including subsidizing ergonomic furniture.
Some firms pay for setups of $200 to $300. Others offer partial ongoing reimbursement for an employee’s home internet service and cell service.
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