Trump-Era Tax Cuts Are Expiring: 4 Things To Know About Filing Your 2023 Taxes
Written by
Josephine Nesbit
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Nicholas Morine
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Trump-era tax cuts are expiring, meaning taxpayers could see big changes to their tax bills if the law isn’t extended. While these aren’t due to expire until the end of 2025, there are other changes taking effect that all taxpayers should be aware of.
Enacted by former President Donald Trump in 2017, the Tax Cuts and Jobs Act (TCJA) changed the nation’s tax code, reducing the top individual income tax bracket and nearly doubling the size of the standard deduction. These changes are set to expire in 2025, and millions of taxpayers could face steeper levies if this law isn’t extended, according to Fox Business.
“If lawmakers allow full expiration to occur, most Americans will see their personal tax bills rise and incentives for working and investing worsen,” Erica York, senior economist and research director at the Tax Foundation, explained to Fox Business.
But other changes are coming before then, and the IRS says that by creating a record-keeping system, you’ll put yourself in the best position to file an accurate return and avoid delays. Here are upcoming changes to consider for this tax season.
Wider Tax Brackets
Experts say there was a big adjustment to the federal income tax brackets in 2023 due to inflation, CNBC reported. Rates didn’t change, but there was a 7% increase in the brackets, which expanded the amount of taxable income you can have in each tier.
Larger Standard Deduction
Inflation also increased the standard deduction for 2023, which reduces your taxable income. However, it also makes it more difficult to claim itemized tax breaks for charitable giving or medical expenses, according to CNBC. This higher standard deduction is due to expire with the Tax Cuts and Job Act.
The standard deduction increased to $27,700 for married couples filing jointly, up from $25,900 in 2022. Single filers can claim $13,850, up from $12,950.
Form 1099-K Reporting Changes Delayed
In November, the IRS announced delayed reporting changes for business payments via apps like PayPal or Venmo, CNBC noted. Before this change, a payment of $600 would have required Form 1099-K.
The IRS is calling 2023 a “transition year,” and 2023 will have the old limit of more than 200 transactions worth a combined total of $20,000, CNBC added.
Energy Tax Credits
Did you make energy improvements to your home or purchase a new all-electric car, fuel cell vehicle or hybrid plug-in? You may qualify for a tax break.
If you made qualified energy-efficient improvements to your home after Jan. 1, 2023, the IRS says you may qualify for a tax credit of up to $3,200. You can column the credit for improvements made through 2032. The clean vehicle tax credit caps the amount at $7,500.
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