7 New Things to Know Before Filing Your 2023 Tax Return
What’s new for taxpayers
Managing taxes on your income is critical for keeping as much money as possible working for you. Yet, keeping up with changing tax legislation, rules, and adjustments is no easy task. Whether you’re preparing your own returns or enlisting the help of a tax professional, it’s important to be aware of these and other changes that may impact your 2023 returns.
1. The standard deduction increased. The standard deduction helps to determine how you should file your taxes. If itemized deductions add up to more than the standard deduction, it makes sense to itemize. If not, take the standard. Standard deduction amounts for tax year 2023 are: $13,850 for individuals and $27,700 for married filing jointly. If you’re 65 and older or blind, you get an additional standard deduction in the amount of $1,850 for single taxpayers and $1,500 per qualifying individual for married filing jointly.1
2. Income limits for tax brackets have been adjusted for inflation. While the seven tax rates: 10%, 12%, 22%, 24%, 32%, 35% and 37% remain unchanged for 2023 and 2024, income tax brackets are adjusted each year to help avoid "bracket creep." That happens when inflation pushes taxpayers into a higher income tax bracket without an increase in real income. You can view 2023 tax brackets and rates based on your filing status at IRS.gov.2
3. AMT exemptions are higher. Taxpayers in higher income brackets are required to determine their income tax liability twice: once using regular income tax rules, and once using alternative minimum tax (AMT) rules. You pay whichever amount is higher. AMT doesn't kick in until income reaches beyond a certain exemption level, which is adjusted annually. For 2023, the amount of income taxpayers can exempt before triggering AMT rose to $81,300 for single filers and $126,500 for married taxpayers filing jointly. The phase-out thresholds increased to $1,156,300 for married filing jointly and $578,150 for all others.3
4. You can contribute more to your IRA. April 15, 2024, is the deadline to make IRA contributions for tax year 2023. Individuals can contribute up to $6,500 to an IRA ($500 more than in 2022), and those age 50 and older can make an additional $1,000 catch-up contribution, for a total of $7,500. (Contribution limits increase another $500 this year, rising to $7,000 plus another $1,000 for eligible catch-up contributions, for a total of $8,000 for tax year 2024.)
5. Certain deductions don’t require you to itemize. While these deductions are not new in 2023, changes in your life or circumstances could mean you’re eligible for certain above-the-line deductions that you were not eligible for in the past. The following are valuable dollar-for-dollar deductions that are available to taxpayers, whether you itemize or take the standard deduction.4
- Alimony you paid
- After-tax health savings account (HSA) contributions
- Traditional individual retirement account (IRA) contributions for you or your spouse
- Student loan interest payments
- Early withdrawal penalties on CDs
- Military moving expenses
- Teacher supplies, up to $300 annually
Self-employed individuals can also take above-the-line deductions for medical insurance premiums they paid (including Medicare premiums), half of the 15.3% they owe in payroll taxes, and contributions to retirement plans, such as SIMPLE IRA, SEP, and individual 401(k) plans.
6. The child tax credit may increase for lower-income taxpayers. The child tax credit (CTC) is a nonrefundable credit available to taxpayers with dependent children under age 17. Under current law, for 2023, the child tax credit is worth $2,000 per qualifying dependent child if your modified adjusted gross income is $400,000 or below (married filing jointly) or $200,000 or below (all other filers). Taxpayers who qualify for the CTC but don't owe taxes or owe less than their credit amount may be able to get a partial refund by claiming the additional child tax credit, up to $1,600. (This refundable tax credit may increase to $1,800 for 2023 under The Tax Relief for American Families and Workers Act of 2024, which was pending Senate approval at the time of this publication. The proposed legislation would also adjust the limit in future years to account for inflation.)5
7. This year’s filing deadline is April 15. For the first time in several years, the deadline for filing your return will actually fall on April 15. If you plan to file an extension, keep in mind that any tax liability must be paid by April 15, 2024, to avoid penalties.
For a complete list of tax deductions and credits you may be eligible for, visit IRS.gov and download IRS Publication 529, Miscellaneous Deductions, or schedule a time to meet with a tax professional.
If you have questions about your tax-smart investment strategy, call the office to schedule a time to talk.
1) Taylor, Kelley R., “What’s the 2023 Standard Deduction?” Kiplinger.com, 18 DEC 2023, https://www.kiplinger.com/taxes/tax-deductions/602223/standard-deduction.
2) “Federal income tax rates and brackets.” IRS.gov, 23 JAN 2024, https://www.irs.gov/filing/federal-income-tax-rates-and-brackets.
3) “IRS provides tax inflation adjustments for tax year 2023” IRS.gov, https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2023.
4) Waggoner, John, “8 Common Above-the-Line Deductions Anyone Can Claim.” AARP.com, 29 MAR 2023. https://www.aarp.org/money/taxes/info-2023/above-the-line-deductions.html
5) Parys, Sabrina and Orem, Tina, “Child Tax Credit 2023-2024: What It Is, Requirements and How to Claim.” Nerdwallet.com, 17 JAN 2024, https://www.nerdwallet.com/article/taxes/qualify-child-child-care-tax-credit.
This information was written by KRW Creative Concepts, a non-affiliate of the Broker/Dealer.
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