2023 Tax Update Newsletter (Tax Year 2022)
Happy New Year! If you would like to send your tax information via a secure electronic portal, the link is on my website www.jblackassociates.net. There is electronic signature option for your return, and also accepting electronic payments (credit cards and debit cards), in addition to checks. Please take a few minutes to review this newsletter. If you have any questions, call me or enclose a note with your tax information. If you didn’t receive an organizer with this letter and you would like one, let me know. When you mail something to me, please use the PO Box and not my street address in Spring Grove. Filing season this year is expected to begin January 24th for electronic return transmission to the IRS.
The following information includes some, but not all of the major changes, which affect tax years 2022 and 2023.
(Not new, but warrants repeating) Starting in 2021, you may voluntarily opt into the IP PIN program to protect yourself from tax-related identity theft. You will be furnished a new PIN annually. I strongly suggest this, as identity theft is increasing. A number of clients could not e-file their returns, as one was already filed for them.
Premium tax credit and its expanded eligibility is extended through 2025
Age for mandatory minimum distributions from 401(k) or IRA is now 73, effective 1/1/2023.
Educator expense deduction is increased to $300 for 2022
Standard Deduction increases to $13,850 for single, $27,700 for married filing jointly, and $20,800 for head of household.
Child Tax Credit . is reverting to pre 2021 amounts. Age limit is changed back to 16, max credit per child is $2000 and $1400 of that may be refundable.
HSA contribution for 2022 (for those in high deductible health plans, where the 2023 deductible is $1,500 single and $3,000 family) the maximum contribution for 2022 is single $3,650 and family $7,300 and 2023 is single $3,850 and family $7,750. There is an annual “catch up contribution” available for those age 55 and over of $1,000.
Earnings Ceiling for Social Security. Prior to reaching full retirement age, there is a deduction of $1 for every $3 you earn over the limit. For 2023 under full retirement age is $21,240 and for the year full retirement is reached is $56,250. Maximum FICA taxable earnings for 2022 and 2023 are $147,000 and $160,200 respectively.
Standard Mileage Deduction 2021 rates (in cents): for the first half of 2022 Business- 58.5; Charitable- 14, Medical 18… second half (after July 1) is 62.5, 14 and 22 respectively. For 2023, these rates are 65.5 business, 14 charitable, and 22 cents Medical. Reminder, deduction is dependent on "contemporaneous" (occurring at the time of the event, not reproduced later) mileage log including who, what, where and when.
Pension and IRA Contribution Limits---Maximum retirement contributions for 2022 is $6,000 and 2023:$6,500 (catch up of $1,000 for both years) and SIMPLE- $14,000 for 2022 and $ 15,500 for 2023 (catch up $3k for 2022 and $3500 for 2023). 401(k), 403(b) and most 457 plans are $20,500 for 2022 and $22,500 for 2023 (catch up of $6,500 for 2022 and $7,500 for 2023). For defined contribution plans and SEPs, limits are lesser of $58k or 25% of compensation, and $k for 2023. Please consult your investment advisor or contact me regarding the phase out of deduction/allowable amount, as there are income limitations and rules when you have more than one retirement plan.
The income phase -out range for deducting traditional IRA contributions and making Roth IRA contributions increases. (Consult Notice 2022-55 for specifics about your situation)
Saver’s Credit income limits You get a credit on your Federal return in addition to reduced taxes caused by making a retirement contribution. This credit is eligible for married couples filing jointly $73k or less, head of household $54,750 and single individuals or married filing separate $36,500.
Above the line deduction for charitable contributions has been discontinued.
Virtual Currency transactions are required to be reported on your return. What schedule to report on depends on what you received it for (capital transactions, business income, etc) Starting in 2023, the IRS requires brokers to provide reporting statements to individuals with virtual currency transactions.
Child and Dependent Care Credit has been modified for 2021 only. It can be refundable, and is increased to a maximum of 50% of employment-related expenses, up to a limit of $8,000 for one qualifying person and $16,000 for two or more qualifying persons (so a max credit of $4000 to $8000). Credit is subject to a two part phaseout.
Food and Beverages provided by a restaurant after 12/31/2020 and prior to 1/1/2023 are fully deductible.
Energy efficient home improvement credits under IRC section 25C are extended to 12/31/2032
Clean vehicle credit is available to buyers of qualifying plug-in electric vehicles.
Taxpayer First Act Changes On 2/3/2020, IRS launched Identity Theft Central, designated to improve access to information about identity theft and data security protection for taxpayers, tax professionals and businesses. Located at http://www.irs.gov/identitytheft.
Circular 230 Disclaimers
Any tax advice contained in this newsletter is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service, or to promote, market, or recommend to another person any tax related matter.
These materials are distributed with the understanding that Jacqueline Black & Associates, Ltd. assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein. The reader is also cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated.