CURRENTLY NOT ACCEPTING
(Dec 1, 2022) At this time, Sunset Accounting is not excepting any new clients. Thank you for the business.
The IRS has announced major adjustments to dozens of tax rules that will apply in 2023. These are changes that impact your taxes next year and will be reflected in the return you file in 2024.
Your standard deduction will be higher
The standard deduction has been raised for 2023. The new deductions are:
- $27,700 for married couples filing jointly (up from $25,900 in 2022)
- $13,850 for single filers and married individuals filing separately (up from $12,950 in 2022)
- $20,800 for heads of households (up from $19,400 in 2022)
Marginal rates for tax year 2023
– 10%: income of $11,000 or less
– 12%: income between $11,001 and $44,725
– 22%: income between $44,726 and $95,375
– 24%: income between $95,376 and $182,100
– 32%: income between $182,101 and $231,250
– 35% income between $231,251 and $578,125
– 37%: income greater than $578,125
Married filing jointly
– 10%: income of $22,000 or less
– 12%: income between $22,001 and $89,450
– 22%: income between $89,451 and $190,750
– 24%: income between $190,751 and $364,200
– 32%: income between $364,201 and $462,500
– 35% income between $462,501 and $693,750
– 37%: income greater than $693,750
The earned income tax credit will get bigger
For 2023, the amount is $7,430 for taxpayers who have three or more qualifying children. That is up from $6,935 in 2022. The IRS has an online tool that can help you learn if you qualify.
Capital gains tax thresholds
The IRS has increased the threshold for how long-term capital gains are taxed in 2023.
The zero-rate amount applies to gains between:
- $0 and $89,250 for married couples filing jointly
- $0 to $59,750 for heads of households
- $0 to $44,625 for married couples filing separately and single filers
The maximum 15% amount applies to gains between:
- $89,251 to $553,850 for married couples filing jointly
- $59,751 to $523,050 for heads of households
- $44,626 to $276,900 for married couples filing separately
- $44,626 to $492,300 for single filers
Anything above those upper limits is taxed at 20%. Short-term capital gains are still taxed as ordinary income.
You can contribute more to a 401(k)
The amount that employees can contribute to their 401(k) is increasing for 2023. It will be $22,500, a $2,000 boost from the $20,500 limit in 2022.
The “catch-up contribution” limit for workers 50 and older also will increase to $7,500. That means employees in this age bracket can contribute a total of $30,000 to their 401(k) next year.
As with many of the higher limits on this list, the IRS is raising the 401(k) contribution limit in response to the inflation that is surging through the U.S. economy.
You can contribute more to an IRA
The new contribution limit for traditional IRAs and Roth IRAs will be $6,500 next year, a $500 increase from 2022.
The catch-up contribution for those who are 50 or older remains $1,000. That means folks in this age bracket can contribute a total of $7,500 to their IRA in 2023.
You can contribute more to an HSA
Health savings account contribution limits are being increased for 2023 to adjust for inflation.
If your HSA covers only you as an individual, the new contribution limit is $3,850, up $200 from 2022. For HSAs that cover a family, the contribution limit is increasing to $7,750, up $450 from 2022.
To qualify to contribute to an HSA plan in 2023, your deductible must be at least $1,500 for individual coverage, or $3,000 for family coverage. Annual out-of-pocket expense maximums cannot exceed $7,500 for self-only coverage and $15,000 for family coverage.
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