You are not alone if you are still working on submitting your tax return in 2023. Many people wait until the final day of April 15 — or April 18 in 2023 — to complete their tax returns.
This is expected to be especially true in 2023, given the enactment of a number of significant modifications to key tax legislation. Before you hit submit on this year’s electronic file or drop off your paper return at the post office, consider these IRS secrets for the 2023 tax filing season.
Tax Brackets And Deductions
In 2022, inflation may have wreaked havoc on American finances and even the stock market, but there is at least one silver lining for tax filers.
The IRS raises tax brackets and deduction levels annually based on the prior year’s inflation rate. For the tax year 2023, this implies that the standard deduction for single taxpayers is $13,850, up from $12,950, and that the standard deduction for joint filers is $27,700, up $1,800.
In 2023, the loss of three key pandemic-era tax benefit improvements will be one of the most significant changes affecting taxpayers.
In particular, the greater benefits for the Earned Income Tax Credit, the Child Tax Credit, and/or the Child and Dependent Care Credit for tax years 2020 and 2021 will be reverted to their pre-pandemic levels for the tax year 2019.
Some homeowners will receive one less tax break
In the past, customers who purchased mortgage insurance, which was normally required for down payments of less than 20%, may deduct the premium amount. For the 2022 tax year, this provision has been repealed.
Charitable Donors Have One Less Deduction
Contributions to qualified charities are tax-deductible, however, in most tax years, itemization is required to receive the deduction. In the 2021 tax year, the IRS permitted an above-the-line deduction of up to $300 for single filers and $600 for joint filers. However, this tax exemption was not renewed for the 2022 tax year.
Filing a month late is permissible without requiring an extension
In certain years, the IRS delays the tax filing deadline for states affected by natural disasters. For the 2022 tax year, this extension applies to the majority of Californians and certain Alabama and Georgia residents.
Originally allowed until May 15, the extension has recently been extended until October 16, 2023. Significantly, this extension also applies to contributions to IRAs and health savings accounts for the 2022 tax year.
Modification of the EV Tax Credit
For the tax year 2022, changes to the EV Tax Credit are more complex, with separate rules taking effect for purchases made on or after August 17th. Under the new law, in order to qualify for the $7,500 electric vehicle tax credit, your vehicle must have undergone final assembly in North America or you must have acquired it before August 17.
The U.S. Department of Energy has launched a webpage for buyers to determine whether or not their vehicle is eligible. Note that other adjustments to the EV Tax Credit eligibility requirements, including restrictions on car pricing and purchaser income, are not yet in force.
Increase in the Mileage Deduction
The IRS boosted the permissible business mileage deduction for the second half of 2022 to 62.5 cents per mile, up from 58.5 cents per mile for the first half of the year. The medical mileage reimbursement increases to 22 cents per mile in the second half of the year, up from 18 cents per mile in the first half.
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Your Tax Refund Might Be Less
The loss of pandemic-era tax benefits, the mortgage insurance premium deduction, and the above-the-line charitable contribution write-off have lowered the size of refunds so far in 2023, as taxpayers who would have claimed these tax breaks presumably experienced an increase in taxable income.
This was expected by economists in 2022, but data from the real world indicates that these tax changes have already had an impact. According to IRS data as of March 3, 2023, refunds are down approximately 11% from 2022 levels.
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