Credit and Deduction Changes For 2023 Tax Filings

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It’s tax time, and we are already working through client tax returns. The IRS is currently issuing resources, new information, and guides to ensure tax season goes smoothly for all filers.

Before we get into the credit and deduction changes for 2023 tax filing, one big change we see is that many of our clients have struggled with the increased cost of living in the past year, and while they are eager to retain as much income as possible this year, they’re also ready for some strategic tax planning in 2024. This is one of the most overlooked benefits of working with a CPA. Don’t be afraid to reach out and simply ask if there’s something you could be doing to save on taxes next year.

Deadline Reminder! April 15th is Tax Day!

We wish to remind all folks filing in the U.S. that the deadline for filing your 2023 taxes is April 15th, 2024. This is with the exception of individuals filing from Maine and Massachusetts, who have until April 17th.

Important Tips

There are a few things to remember as you are going through the filing process. Here are a few things to keep in mind:

  • Make sure you have all of your tax documents from the various issuing organizations, employers, banks, health insurance, etc. before filing your return
  • Double check your tax documents for accuracy
  • Make sure your records are organized and that your CPA has everything they need in order to prepare your return
  • If you have an ITIN (Individual Taxpayer Identification Number), make sure it is not expired before filing your return.

Key Change for 2023: The American Rescue Plan Act of 2021 has Expired

One major change for the 2023 tax year is that the American Rescue Plan Act of 2021 has expired and will not apply for the 2023 tax year. This affects expansions to the child tax credit and the earned income tax credit, as well as other key credits and deductions. This is why we absolutely recommend working with a CPA for filing in 2023, as many folks are unaware and confused by changes to their tax burdens in 2023 and benefit not only from the assistance, but from strategic planning for the 2024 tax year as well.

Changes to Standard Deduction for 2023 Tax Filing

For 2023, the standard deduction amount was increased for all filers. Please see the table below.

Filing Status2023 Standard Deduction2022 Standard DeductionIncrease
Single or Married Filing Separately$13,850$12,950+$900
Head of Household$20,800$19,400+$1,400
Married Filing Jointly$27,700$25,900+$1,800
Qualifying Surviving Spouse$27,700$25,900+$1,800
Am I Eligible for the Standard Deduction?

The standard deduction is available to many tax payers. One of the main reasons you would not be eligible is if you wish to itemize your deductions.

Here are some common scenarios in which you are not eligible for the standard deduction:

  • You are married, filing separately, but your spouse itemizes deductions
  • You are filing for a period of fewer than 12 months
  • You are filing as an estate, trust, common trust fund, or partnership

You also are not eligible for the standard deduction if you are a non-resident or dual-status alien, unless…

  • You married a U.S. citizen at the end of the tax year and elect to be treated as a U.S. citizen for the full tax year,
  • You started the year as a non-resident or dual-status alien, are a U.S. citizen at the end of the tax year (2023), and are married to a U.S. citizen or resident, AND choose to be treated as a U.S. citizen for the full tax year, or
  • You are a student or business apprentice, a resident of India, and eligible for benefits under the United States-India Income Tax Treaty

Please speak with a reputable CPA with knowledge of your circumstances before claiming the standard deduction.

Child Tax Credit Changes for 2023

For 2023, there are some significant changes to the childhood tax credit, the first of which being that the maximum additional amount per qualifying child has increased to $1,600. The rules for this are incredibly complex, so please speak with a CPA before taking this credit.

For 2023, the base amount for Child Tax Credit is $2,000 per qualifying child.

Am I Eligible for the Child Tax Credit?

The Child Tax Credit is not available to folks whose adjusted gross income is over $200,000 for individual filers, and $400,000 for joint filers.

In order to qualify for this credit, the child must be under the age of 17 at the end of the year.

(EITC) Earned Income Tax Credit Changes for 2023

The biggest change to the EITC for 2023 is that the American Rescue Plan of 2021 has expired, which means the enhancements for taxpayers without a qualifying child have expired as well. In 2023, if you are childless, you or one spouse in a join filing situation must be age 25 to 64 at the end of the year in order to qualify.

There Are More Child Tax Credits Available

Don’t think that just because of these changes that you are missing out on tax credits. Many of our clients come to us not realizing just how many tax credits they qualify for. Please speak with a CPA to ensure you are receiving all the credits and deductions available to you, and in a year when things have been very expensive, you are retaining as much of your income as possible.

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