Why some Americans are paying taxes this year

 

SOUTH BEND, Ind.-- Many are likely to find themselves paying taxes this year instead of getting a tax refund. While that is alarming, certified financial planner Mike Bernard said there is good news, too.

"With COVID and stimulus and all sorts of different tax law changes, taxes have changed a lot each of the past three years," he said. "This year, it's more of the same, it's just the economy has changed."

Tax brackets have expanded as a result of inflation.

"So those rates are still the same, but the brackets expanded due to inflation," Bernard said. "From about $22,000 up to about $90,000, is taxed at 12%, where just a couple of years ago, it was around $80,000. So those brackets have expanded, which means you can earn more income and stay in lower tax brackets."

But that said, many people got a side job or extra work to deal with higher prices, and that extra income might mean owing more in taxes.

Additionally, social security payments increased for many retired Americans -- again due to inflation -- and that will likely mean many will be taxed on their social security payments for the first time.

"Because of inflation, tax brackets have expanded so you actually can earn more income and keep it at lower rates, pay at lower rates," Bernard said. "But because of interest, income increasing, because social security has increased, maybe to keep up with inflation you got a second job, or how strong the job market's been, you've got multiple sources of income, that could mean a tax surprise if you don't have enough withholdings."

The "Tax Cut and Jobs Act" from 2017 does not sunset until 2025 so that law does not have much effect on taxes this year, but it could have an impact in 2026.

The deadline to file taxes this year is April 15.