2023 Tax Season: What You Need to Know
It is that time of year again. Ugh, right?!?! Taxes may not be the most exciting topic, but being informed and prepared can help you avoid any stress or unexpected surprises come tax time. A few changes come with the 2023 tax season. Let’s not waste too much time and dive right in.
- Standard Deductions Increase: For 2022, the standard deduction increased to $12,950 for single filers and $25,900 for married couples filing jointly. You will have the option of taking the standard deduction or itemizing your deductions, which is calculating your deductions one by one. Itemizing can be complicated, but it is well worth it if they add up to more than the standard deduction.
| Filing Status | 2021 | 2022 | 2023 |
| Single | $12,550 | $12,950 | $13,850 |
| Married Filing Jointly | $25,100 | $25,900 | $27,700 |
| Married Filing Separately | $12,550 | $12,950 | $13,850 |
| Head of Household | $18,800 | $19,400 | $20,800 |
And to keep you on your toes, might as well know that it will increase again next year. When you file in 2024, it increases to $13,850 for single filers and $27,700 for married couples filing jointly.
Not sure whether or not to take the standard deduction or itemize? Each taxpayer’s situation is different. So please reach out to a trusted tax advisor to assess your situation.
Unfortunately, a lot of the extra added benefits that came with the pandemic in 2021, goes away. The IRS warns us to expect smaller tax refunds in 2023. Two of the biggest reasons are:
- There were no economic impact payments in 2022, so you won’t get an extra stimulus payment in your 2023 tax refund checks.
- Expanded tax credits and deductions reverted to their pre-COVID-19 amounts.
Tax Deductions and Credits to Consider for 2023 and 2024
Tax credits can significantly reduce your tax liability. Some common tax credits include the earned income tax credit, the child and dependent care credit, and the American Opportunity Tax Credit. Be sure to familiarize yourself with the tax credits that you may be eligible for and take advantage of them when you file your tax return.
- Retirement Plans: You can contribute up to $22,500 into 401(k), 403(b) and most 457 plans — $2,000 more than the $20,500 contributions limit for 2022. This can help you save more for retirement which in many cases will help lower your income tax. In addition, the limit on annual contributions to an IRA increased to $6,500 up from $6,000.
- Charitable Deductions: The $600 charitable deduction for non-itemizers taking the standard deduction is no longer available. Although you can still deduct qualified charitable donations you made in 2022, it is limited to 60% of your adjusted gross income (AGI).
- Earned Income Tax Credit (EITC): The EITC is a refundable credit designed to assist low- and middle income households. In order to qualify in the 2022 tax year, an individual with no children, maximum AGI must be below $16,480, while the max for a married couple with 3 or more children is $59,187.
Maximum Adjusted Gross Income Limits
| Dependents Claimed | Single, Head of Household or Widowed | Married Filing Jointly |
| 0 | $16,480 | $22,610 |
| 1 | $43,492 | $49,622 |
| 2 | $49,399 | $55,529 |
| 3 or more | $53,057 | $59,187 |
Maximum EITC Credits
| Qualifying Dependents | Maximum Credit Amounts |
| 0 | $560 |
| 1 | $3,733 |
| 2 | $6,164 |
| 3 or more | $6,935 |
- Tax Brackets Increase: Income Tax brackets went up in 2022 to account for inflation. And will increase again next year. For the 2022 tax year, the tax brackets went up a few hundred dollars to account for inflation.
| 2022 Marginal Tax Rates | Single Tax Bracket | Married Filing Jointly Tax Bracket |
| 10% | $11,000 or less | $22,000 or less |
| 12% | $11,001 to $44,725 | $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 |
Although this seems like a lot, this is only some of the major changes you will see this year. In order to feel confident completing your taxes this year, please consult with a trusted tax advisor. If your tax situation is complicated, or if you simply want peace of mind, consider hiring a tax advisor. Here at Giles Consulting, we can help ensure that your tax return is completed accurately and can help you navigate any tax-related questions or issues that you may have.
Some other tips to keep in mind this tax season:
- Plan for Estimated Tax Payments: If you’re self-employed or have other sources of income that aren’t subject to withholding, you’ll need to make estimated tax payments throughout the year. These payments are used to pay your income and self-employment taxes as you earn income, instead of paying it all at once at tax time. By making estimated tax payments, you can avoid underpayment penalties and ensure that you have enough money to pay your taxes when they are due.
- Keep Good Records: Good record-keeping is crucial for a successful tax season. Did you keep your receipts? Keeping receipts, invoices, and any other documents that support your income and expenses are very important come tax season. This will make it easier to complete your tax return accurately and to take advantage of any deductions or credits that you may be eligible for.
- File Electronically: Filing your tax return electronically is not only more convenient, but it can also help you avoid errors and reduce your chances of a tax audit. E-filing is also a faster way to get your refund and eliminates the possibility of your return being lost or delayed in the mail.
To sum it all up, being informed and prepared for the 2023 tax season can help you avoid any stress or surprises. File your taxes with confidence in 2023 avoiding costly mistakes.
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