Tax season will officially begin on Jan. 29, 2024. That’s the day the IRS will start accepting and processing returns for the 2023 tax year.
For 2023 federal income tax returns, i.e., normally due in April 2024, the standard deduction amounts are as follows:
2023 Standard Deduction Amounts: (Returns Normally Due April 2024)
Filing Status 2023 Standard Deduction
Single; $13,850
Married Filing
Separately
Married Filing $27,700
Jointly; Qualifying
Widow(er)
Head of $20,800
Household
Note: If you are at least 65 years old or blind, you can claim an additional 2023 standard deduction of $1,850 (also $1,850 if using the single or head of household filing status). If you're both 65 and blind, the additional deduction amount is doubled.
If you can be claimed as a dependent by another taxpayer, your 2023 standard deduction is limited to the greater of $1,250 or your earned income plus $400 (but the total can't be more than the basic standard deduction for your filing status).
2023 Child Tax Credit
The child tax credit is a federal tax benefit that plays an important role in providing financial support for American taxpayers with children. People with kids under the age of 17 may be eligible to claim a tax credit of up to $2,000 per qualifying dependent. For 2023, $1,600 of the credit is potentially refundable.
Education Savings Bond Program
Although the interest on U.S. savings bonds is normally taxable as ordinary income, a taxpayer may exclude some or all of the interest on certain cashed in savings bonds if he or she pays qualified education expenses and meets federal income tax filing status and income requirements. The U.S. savings bonds that qualify for the education savings bond program are series EE bonds issued after 1989 and series I bonds.
When you convert from a traditional IRA to a Roth IRA, the amount that you convert is added to your gross income for that tax year. It increases your income, and you pay your ordinary tax rate on the conversion.
Retirement Savings Contribution Credit
The retirement savings contribution tax credit—typically referred to as the saver’s credit—is a nonrefundable credit that is limited to the applicable percentage of the taxpayer’s eligible retirement savings contributions; the credit is equal to the product of up to $2,000 of eligible contributions multiplied by the percentage determined by the taxpayer’s adjusted gross income and tax filing status. Accordingly, the saver’s credit cannot exceed $1,000 per taxpayer.
STANDARD MILEAGE RATES
The 2023 alternative standard mileage rate applicable to eligible business use of a vehicle is 65.5¢ per mile, up from 62.5¢ in the last half of 2022. In addition to using the standard mileage rate, a taxpayer may also deduct any business-related parking fees and tolls paid while engaging in deductible business travel. The standard mileage rate applicable to a taxpayer’s use of a personal vehicle for charitable purposes is based on statute and is 14¢ per mile. The taxpayer may also deduct parking fees and tolls regardless of whether the actual expenses or standard mileage rate is used. For 2023, the standard medical mileage rate is 22¢ per mile, the same as in the last half of 2022. The taxpayer may also deduct any parking fees or tolls, regardless of whether actual expense or the standard mileage rate is used.
MINIMUM DISTRIBUTIONS REQUIRED AT AGE 73
Required minimum distributions—often just referred to as RMDs—represent the federal government’s opportunity to impose income taxes on untaxed traditional IRA and qualified plan funds. The excise tax payable for failing to take an RMD by the required date is reduced from 50% to 25% and is further reduced in the case of an IRA to 10% if the failure is corrected by the end of the second taxable year that begins after the end of the taxable year in which the distribution was required to be made.
NEW CLEAN VEHICLE CREDIT
The provision of the IRA authorizing the nonrefundable tax credit for the purchase or lease of a new electric vehicle—a provision generally effective for vehicles placed in service after December 31, 2022 and not later than December 31, 2032—provides for a maximum tax credit of $7,500 and subject to eligibility based on the vehicle’s MSRP and taxpayer’s MAGI is provided; and A nonrefundable tax credit for purchase of a previously-owned clean vehicle is available in an amount equal to the lesser of $4,000, or 30 percent of the vehicle’s sale price not exceeding $25,000, subject to eligibility based on the taxpayer’s MAGI.
Early Distributions
A participant who takes a distribution from a qualified retirement plan before age 59½ is subject to a premature distribution tax penalty equal to 10% of the amount of the distribution the participant must include in income unless an exception applies. An exception applies if the participant is disabled or deceased or the distribution is:
• Part of a series of substantially-equal lifetime payments;
• Pursuant to a qualified domestic relations order;
• For medical care to the extent tax deductible;
• Made to correct excess contributions;
• Made on account of separation of service after attainment of age 55; or
• A qualified birth or adoption distribution not exceeding $5,000.
Qualified Plan Rollovers
When a participant in a qualified plan leaves the employ of the plan sponsor, the participant may roll over the assets to his or her credit in the plan—an amount equal to the participant’s vested account balance, in other words—and avoid current taxation of the funds. To avoid the plan trustee’s required 20% withholding, the rollover must be made by the plan trustee to the trustee of the new plan or IRA.
Temporary Increase in Business Meal Deductibility
The Consolidated Appropriations Act, 2021 provides for temporarily increased deductions for business meals. Pursuant to the Act, businesses are permitted a 100% tax deduction for business meals—up from the current 50%—if the food or beverages are provided by a restaurant. The increased business meal deduction was available for 2021 and 2022. The general rule (50%) for business meal deduction applies in 2023.
The information provided above is just a portion of the changes that has taken place for the 2024 filing season.
Copyright © 2018 B&G accounting and tax service - All Rights Reserved.
Powered by GoDaddy Website Builder
