If you’re still working on filing your tax return in 2023, you’re not alone. Many Americans take all the way until the final day of April 15 — or, for 2023, April 18 — to finish their returns.
This is likely to be particularly true in 2023, as some relatively significant changes to a number of different tax rules have gone into effect. Before you hit “send” on your electronic filing this year — or drop off your paper return at the post office — be sure to review these IRS “secrets” to know for the 2023 tax filing season.
Tax Brackets, and Deductions, Moved Up Significantly for 2023
Inflation may have wreaked havoc on American budgets and even the stock market in 2022, but for tax filers, there is at least one silver lining.
Every year, the IRS adjusts tax bracket and deduction levels upwards based on the prior year’s rate of inflation. For tax year 2023, this means that the standard deduction for singles is $13,850, up from $12,950, while joint filers will enjoy a bump of $1,800 in their standard deduction, to $27,700.
Pandemic-Era Tax Breaks Are No More
One of the biggest changes affecting taxpayers in 2023 is the elimination of three key pandemic-era enhancements to certain tax breaks. Specifically, those claiming the Earned Income Tax Credit, the Child Tax Credit and/or the Child and Dependent Care Credit will see the increased benefits for tax years 2020 and 2021 rolled back to the pre-pandemic levels of the 2019 tax year.
One Less Tax Break for Certain Homeowners
In years past, those who paid mortgage insurance — typically required for down payments smaller than 20% — were able to deduct the premium amount. For tax year 2022, that provision has been eliminated.
And One Less Deduction for the Charitably Inclined
Qualifying charitable contributions are tax-deductible, but in most tax years, you must itemize in order to claim any benefit. This temporarily changed in tax year 2021, as the IRS allowed an above-the-line deduction of up to $300 for singles, or $600 for joint filers. However, this special tax break was not extended for tax year 2022.
In Some States, You Can File a Month Late Without Needing an Extension
In some years, the IRS extends the tax filing date for states that have undergone major disasters. For tax year 2022, this extension applies to most California residents and those living in some parts of Alabama and Georgia.
Originally, the extension was granted until May 15, but it has since been further extended to Oct. 16, 2023. Importantly, this extension also applies to IRA and health savings account contributions for tax year 2022.
Change to the EV Tax Credit
Changes to the EV Tax Credit are a bit convoluted for tax year 2022, with different rules kicking into effect starting for purchases on Aug. 17 or later. Under the new law, you can’t qualify for the $7,500 electric vehicle tax credit unless your vehicle underwent final assembly in North America — or if you purchased it before Aug. 17.
The U.S. Department of Energy has created a special website for purchasers to determine if their vehicle may be eligible. Note that other changes to the qualification standards for the EV Tax Credit — which include limitations on vehicle price and purchaser income — are not yet in effect.
Increase in Mileage Deduction
For the second half of 2022, the IRS increased the allowable business-related mileage deduction to 62.5 cents per mile, up from 58.5 cents per mile for the first half of the year. For medical-related driving, the mileage allowance jumps to 22 cents per mile in the second half of the year, up from 18 cents in the first half.
Your Refund Is Likely To Be Smaller
The elimination of pandemic-era tax breaks, the mortgage insurance premium deduction and the above-the-line charitable contribution write-off have reduced the size of refunds thus far in 2023, as those who would have typically claimed those tax breaks likely saw an increase in their taxable income.
This was predicted by economists in 2022, but real-world information already shows that these tax changes have had an effect. According to IRS data as of Mar. 3, 2023, refunds are down about 11% over those paid in 2022.
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