Tax Season Starting – Here is what to know
The 2023 tax season is ahead of us. There are last minute changes as well as major changes that were determined way before the start of the tax season. The deductions, tax credits, things related to the COVID-19 crisis, deadlines, and more needs to be known about the new tax season.
In this article, we will provide you an overview of everything you need to know before prepping your 2023 tax return.
Standard Deduction and Tax Brackets
This tax season is no different with a new standard deduction and tax brackets. The standard deduction and the income brackets have been increased. The standard deduction increase is $150 which is $50 short of what’s expected as it was increased by $200 every tax season after the TCJA of 2017.
The new federal income tax brackets isn’t that different. There is a slight increase in each bracket but the marginal tax rates remain the same as 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent.
Itemized Deductions and Tax Credit Changes
One of the most notable itemized deductions, the qualifying medical expenses deduction threshold has been updated by the Internal Revenue Service once again. While you could deduct the qualifying medical expenses that exceeds 7.5 percent of your Adjusted Gross Income, this limit was moved up to 10 percent of AGI. Luckily, with the last minute tax changes, the AGI limit has been reduced to 7.5 percent which make the deduction more accessible overall.
Earned Income Tax Credit
If you will take the earned income tax credit in 2023, know that the income limits have been increased. Although the below income limits refer to some of the earned income tax credit, here is the average income limits for the EITC 2021.
|Filing Status||Income Limit Without Children||Income Limit With One Children||Income Limit With Two Children||Income Limit With Three Children|
|Single, Head of Household, or Widowed||$15,980||$42,158||$47,915||$51,464|
|Married Filing Jointly||$21,920||$48,108||$53,865||$57,414|
Taxpayers with income more than shown in the tables above are still qualified for the EITC but it will be smaller than the average credit amount.
TCJA of 2017 through 2025
The most tax changes the Tax Cuts and Jobs Act of 2017 brought are still effective and will be until 2025. The major tax changes are expected to take place in 2022 for the 2023 with the Biden’s presidency. It’s expected that we will see new marginal tax rates for the high earners. As soon as more news emerge about new tax brackets, we will keep you updated.