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Sneaky ways inflation affects your money in 2023

Inflation has a way of affecting nearly every aspect of our finances. Big jumps in tax brackets could save you money, especially if you’re working and your raises — like those of most workers — haven’t kept pace with inflation. Plus, a $2,000 increase in 401(k) limits means you can tuck aside more money for retirement. On the other hand, a whopping increase in the maximum earnings taxed by Social Security means 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’re probably familiar with the more obvious ways inflation affects your finances. Your money doesn’t go as far at the grocery store, for example. Credit card and other variable-rate debt is getting more expensive as the Federal Reserve raises short-term interest rates to combat 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 major changes to watch for in 2023.

This undated file photo provided by NerdWallet shows Liz Weston, a columnist for 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.

In addition, the IRS adjusted federal tax brackets upward by about 7%. The larger deduction, higher brackets and other changes mean most taxpayers will pay less in 2023, especially if their incomes haven’t kept pace with inflation.

Read More: Sneaky ways inflation affects your money in 2023

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