2023 tax refund: why your refund might be lower next year

Oith an ongoing cost of living crisis the United States of America, several states have introduced tax relief measures to ease the financial pressure on their residents. These refund measures were generally aimed at residents of middle-to-low-income households, to help them stay abreast of the rapidly rising inflation that has engulfed several economies this year.

With several pandemic-related tax benefits no longer available, here are five reasons why your tax refund in 2023 could be significantly lower.

Why might my 2023 tax refund be late?

1. The standard deduction for 2022 is higher

While the standard deduction rate for your earned income increases each year, to keep up with inflation, for 2022 the standard deduction for single filers has been increased by $400, meaning the threshold for individual filers is now of $12,950.

Couples filing jointly will face an increase from $800 to $25,900.

2. Child tax credit benefits return to normal

After the pandemic began, the US government temporarily extended Child Tax Credit (CTC) benefits.

This will no longer be the case with the CTC reduced to 2000 dollars per child. In addition, the credit will also only be partially refundable and advance payments will no longer be in effect.

3. Student Loan Forgiveness

While the General Forgiveness Plan, introduced by President Joe Biden earlier this year, is still pending, receiving student loan forgiveness through initiatives such as the Civil Service Loan Forgiveness Program could help you to pay state taxes.

4. Crypto and NFT transactions to be taxed

Although this has been in effect for some time, 2023 will see the IRS pay greater attention to crypto and NFT transactions, which means the market could experience further turbulence.

5. Third-party applications for reporting payments

Apps like PayPal and Venmo are set up to report your payments to the IRS, which means your earnings from these third-party cash apps are subject to greater scrutiny.

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