As we near the 2023 tax filing deadline, we wanted to offer some helpful information. Tax laws are continuously evolving, particularly with the upcoming expiration of the Tax Cuts and Jobs Act in 2025. Keeping up with these changes can be challenging, making it crucial to collaborate with a financial and tax expert to navigate available tax benefits and anticipate potential adjustments.

Here are some key details and things to consider as you prepare to file your 2023 taxes:

Do You Have Children Under the Age of 17?

Filers can continue claiming a $2,000 Child Tax Credit for each dependent under 17 years old. The credit is also subject to a phase-out starting at $400,000 for joint filers and $200,000 for single filers.

The Standard Deduction Increased Slightly

After an inflation adjustment, the 2023 standard deduction increased to $13,850 for single filers and married couples filing separately. For married couples filing jointly, the standard deduction rises to $27,700.

Itemized Deduction Rules Remain Largely Unchanged

• State and local taxes: The deduction for state and local income taxes, property taxes, and real estate taxes is capped at $10,000.
• Mortgage interest deduction: The mortgage interest deduction is limited to $750,000 of debt. But people who had $1,000,000 of home mortgage debt before December 16, 2017, will still be able to deduct the interest on that loan.
• Medical expenses: Only medical expenses that exceed 7.5% of adjusted gross income (AGI) can be deducted in 2023.
• Charitable donations: In 2023, the annual income tax deduction limit for gifts of cash to public charities is 60% of adjusted gross income.

Do You Have a Health Savings Account (HSA)?

Contributions to your HSA are tax-deductible and lower your Adjusted Gross Income (AGI). A lower AGI means you pay less in federal income tax.

HSA Contribution Limits for 2023:

• $3,850 for self-only coverage
• $7,750 for family coverage
• An additional $1,000 catch-up contribution is allowed for individuals aged 55 and older.

HSA Contribution Limits for 2024:

• $4,150 for self-only coverage
• $8,300 for family coverage
• An additional $1,000 catch-up contribution is allowed for individuals aged 55 and older.

Do You Contribute to a Traditional IRA?

A traditional IRA is an individual retirement account that allows your earnings to grow tax-deferred. Taxes on your investment gains are only paid when you make withdrawals during your retirement.

IRA Contribution Limits for 2023:

• $6,500 for individuals under 50
• $7,500 for individuals over 50
• IRA Contribution Limits for 2024:
• $7,000 for individuals under 50
• $8,000 for individuals over 50

Higher Exclusion for Annual Tax-Free Gifts

The estate and gift tax exemption, which is indexed to inflation, rose to $12,920,000 per individual for 2023. This amount is expected to be cut by potentially 50% when the Tax Cuts and Jobs Act sunsets at the end of 2025, providing many with an opportunity to prepare ahead.

The annual gift exclusion increased to $17,000 per recipient, up $1,000 from 2022. The gifting exclusion allows you to gift money each year without incurring any tax liability or using up any of your lifetime estate.
We hope that you will find this information useful. Feel free to contact us if you would like to delve deeper into our services and better understand how we can cater to your specific needs.

Source: Schwab.com, December 4, 2023. "2023 Taxes: 8 Things to Know Now"
URL: https://www.schwab.com/learn/story/taxes-things-to-know-now