2023 Tax Filing Changes

When tax season approaches, it’s important to take care when preparing your forms and reporting your financial information to ensure they reflect your finances accurately. Some aspects of tax filing change each year, so you’ll need to learn about the changes for 2023 to maximize your potential tax refund.

There are several tax preparation tools and resources available that you can use to verify which tax reporting changes apply to you and how to complete some of the main tax forms. For now, let’s look at some of the 2023 tax changes that you should know before filing this year to make sure you get the greatest refund possible.

New Tax Brackets

Man Filling out his taxes

One of the clearest tax changes for 2023 is a shift in income tax brackets. Here’s a table that outlines the new taxable income brackets: 

Tax RateSingle FilersMarried Couples Filing Together
10%$0 to $11,000$0 to $22,000
12%$11,001 to $41,725$20,001 to $89,450
22%$44,726 to $95,375$89,451 to $190,750
24%$95,376 to $182,100$190,751 to $364,200
32%$182,101 to $231,250$364,201 to $462,500
35%$231,251 to $578,125$462,501 to $693,750
37%$578,126 or more$693,751 or more

Increased Standard Deduction

The standard deduction increased in 2023 due to an adjustment for inflation. The new standard deduction for single people filing alone and married couples who are each filing their own taxes increased to $13,850. If someone is single but also the head of their household, usually meaning they’re not married but have at least one dependent, their deduction rises to $20,800. Married couples who are jointly filing now get a standard deduction of $27,700.

Expanded Clean Energy Credits

Tax credits that reward people for making environmentally sustainable choices have existed for a while, but they received some updates for the 2023 filing. For example, the residential clean energy credit is a tax break that allows you to deduct part of the cost of renewable energy fixtures in your home, such as solar panels, wind turbines, or solar electric equipment. The 2023 change adds battery storage technology to the credit, offering 30% of any equipment’s cost as a deduction.

There’s also the energy-efficient home improvement credit, which gives tax breaks for making renovations that promote sustainability, such as energy-efficient doors and windows. In 2023, this credit increased from 10% of the cost of equipment to 30%. It also raised the $500 lifetime limit to a $1,200 annual limit, with a cap of $500 per year for exterior doors and $600 per year for windows. If you add a natural gas heat pump, a biomass stove, or a hot water heater, your annual limit increases to $2,000. You can even get an additional $150 credit for a home energy audit.

The clean vehicle credit got an update in 2023 as well, removing the sales threshold limit for electric vehicles. The credit added criteria that cap the credit at $3,750 for some cars, only allowing you to claim the entire $7,500 tax break if your vehicle meets the critical minerals requirement and battery component regulation.

Heightened IRA and 401(k) Limits

One of the most exciting tax changes in 2023 is an increase in the limits for contributions to retirement accounts. This can help you better prepare for retirement, especially when you max out the contribution you’re allowed to make. According to the new rules, you can now contribute up to $6,500 to an IRA account. You can also qualify for an extra $1,000 catch-up contribution if you’re 50 or older. For tax-deferred 401(k)s and Roth 401(k)s, the limit increased to $22,500 in contributions, with the catch-up contribution for people aged 50 and over rising to $7,500 for the year.

Higher HSA Limits

If you have a health savings account, or HSA, you can qualify for a higher contribution for 2023. For individual contributors, the new limit is $3,850 per year, which is $50 higher than in 2021. For families, the limit rose $100 from 2021 to $7,750 for the year. If you’re 55 or older, you can also qualify for an additional catch-up contribution of $1,000.

More Tax Breaks From the Child Tax Credit

The child tax credit is another tax break that reduces your taxes by a dollar amount rather than by a percentage of income. This typically makes it a lucrative option, especially for families with multiple children in lower tax brackets. For 2023 taxes, the child tax credit amount is $2,000 per child under 17 years old. You can also claim an additional $500 credit for other types of qualified dependents. The child tax credit begins to phase out at $400,000 for couples filing jointly and $200,000 for single taxpayers.

New Alternative Minimum Tax Exemption

The alternative minimum tax (AMT) exemption remains active until 2025, and it primarily impacts households that have an income higher than $500,000. For 2023 taxes, the exemption for single filers is $81,300. For married people filing their taxes together, the AMT exemption is $126,500. There’s also a phase-out threshold that sits at $1,156,300 for joint returns from married couples and $578,150 for all others. If your AMT hits the phase-out threshold in 2024, your exemption will decrease by 25 cents per dollar which surpasses the threshold.

Larger Estate Tax Exemptions

The estate tax exemption allows people to leave money for their surviving family members after they pass away. In 2023, this exemption rose along with inflation, reaching a maximum of $12,920,000. However, this exemption has an expiration date at the end of 2025, meaning it needs extra action from Congress to become permanent. 

Similarly, the annual gift exclusion lets you give money to people without paying taxes on it. In 2023, the annual gift exclusion rose to $17,000 per recipient, which is $1,000 higher than it was in 2022.

Let Pasquesi Sheppard Prepare Your 2023 Taxes

These are some of the most important tax changes for 2023 that you should know. Make sure to pay close attention when completing your tax forms so you know exactly how much you owe or how big your refund will be. If you need assistance, work with an accounting firm such as Pasquesi Sheppard. Our tax preparation services will help you consider every tax change and uncommon scenario, with a certified expert guiding you. Using a comprehensive approach, our team will prepare your taxes accurately and promptly. You can rest easy knowing your finances are in great hands.

man writing on paper by Scott Graham is licensed with Unsplash License