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Tax Law Changes for 2023

By Brad Guerrero

With a new year comes changes to the tax code. We want to take this opportunity to inform you of the tax law changes you should expect to see. Below are some of the most important changes that you should be aware of when you file in 2023.  

Long Term Capital Gain Rates

The long-term capital gain rates and qualified dividends have changed for 2023. 

For taxpayers with taxable income of:

Filing status0% rate15% rate20% rate
Single$0 to $41,675$0 to $44,625$41,676 to $459,750$44,626 to $492,300$459,751 and above$492,301 and above
Married, filing separately$0 to $41,675$0 to $44,625$41,676 to $258,600$44,626 to $276,900$258,601 and above$276,901 and above
Head of household$0 to $55,800$0 to $59,750$55,801 to $488,500$59,751 to $523,050$488,501 and above$523,051 and above
Married, filing jointly$0 to $83,350$0 to $89,250$83,351 to $517,200$89,251 to $553,850$517,201 and above$553,851 and above

Unemployment Compensation

In 2023 unemployment compensation will be fully taxable.

Health Savings Accounts (HSAs)

In 2023 the annual cap for deductible contributions to health savings accounts increased from $3,650 to $3,850 for self-only coverage, and from $7,300 to $7,750 for family coverage.

Retirement Plans

The required minimum distributions are necessary for 2023 only if you were 72 years old in 2022, thereby requiring your first required minimum distribution by April 1, 2023, and the second by December 31, 2023. If you reach the age of 72 in 2023, you will not have to take a required minimum distribution until the 2024 tax year, which will be due by April 1, 2025. 

Standard Deduction

The Standard Deduction increased in 2023. 

Filing StatusStandard DeductionAdditional Standard Deductions
Blind OR 65 or older
Additional Standard Deductions
Blind AND 65 or older
Married, filing separately$12,950$13,850$1,400$1,500$2,800$3,000
Head of household$19,400$20,800$1,750$1,850$3,500$3,700
Married, filing jointly$25,900$27,700$1,400$1,500$2,800$3,000

Charitable Gift Deduction

For tax year 2023, the limit on charitable cash contributions is up to 60% of the taxpayers adjusted gross income in monetary gifts. When filing your tax return make sure that cash contributions do not exceed the charitable contributions limit of 60%. 

Long-Term Care Insurance Premiums

The deduction for long-term care insurance premiums has increased for 2023. 

Age 2022 Deduction2023 Deduction
40 years of age and younger$450$480
41 to 50 years of age$850$890
51 to 60 years of age$1,690$1,790
61 to 70 years of age$4,510$4,770
71 years of age and older$5,640$5,960

Taxpayers are still subject to the 7.5% limitation related to their adjusted gross income with respect to their itemized deductions.

Standard Mileage Rates

For 2023 the standard mileage rates are $0.655 per mile for business, and $0.21 per mile for medical travel and military moves. These limits have increased compared to last year, which had rates of $58.5 and $0.18 respectively. The charitable driving rate will remain at $0.14 a mile as it has been in previous years.

Alternative Minimum Tax

For 2023 the alternative minimum tax exemption has increased from $126,500 to $133,300 for married filing jointly filers, and from $81,300 to $85,700 for single and head-of-household filers. 

There are also higher phaseouts for the exemption in 2023. These phaseouts are $1,218,700 for married filing jointly filers and $609,350 for single and head-of-household filers, which increased from $1,156,300 and $578,150 in 2022.

Estate and Gift Taxes

For 2023, the lifetime estate and gift tax exclusion has increased from $12.06 million to $12.92 million. The gift tax exclusion increases by $1,000 for 2023, to $17,000 per recipient without having to file a gift tax return or tap into your lifetime estate and gift tax exemption.

Tax Brackets for 2023

Tax RateSingleMarried, filing separatelyHead of householdMarried, filing jointly
10%$0 to $11,000$0 to $11,000$0 to $15,700$0 to $22,000
12%$11,001 to $44,725$11,001 to $44,725$15,701 to $59,850$22,001 to $89,450
22%$44,726 to $95,375$44,726 to $95,375$59,851 to $95,350$89,451 to $190,750
24%$95,376 to $182,100$95,376 to $182,100$95,351 to $182,100$190,751 to $364,200
32%$182,101 to $231,250$182,101 to $231,250$182,101 to $231,250$364,201 to $462,500
35%$231,251 to $578,125$231,251 to $346,875$231,251 to $578,100$462,501 to $693,750
37%$578,126 and higher$346,876 and higher$578,101 and higher$693,751 and higher

Child Tax Credit

For the tax year 2023, the Child Tax Credit (CTC) is $2,000 per child under the age of 17 years old, the same as 2022. The refundable part of the Additional Child Tax Credit (ACTC) is worth up to $1,600 for each qualifying child. The CTC/ACTC decreases if your adjusted gross income exceeds $400,000 for married filing jointly, or $200,000 for all other filers. 

Earned Income Tax Credit

For 2023, individuals who work without qualifying children will still be able to claim the earned income tax credit. Those without a qualifying child must be between 25-65 years of age at the end of the year, live within the United States, and cannot be claimed as a dependent by another taxpayer. 

The maximum credit has increased for 2023. 

Dependents2022 Tax Year2023 Tax Year% Increase
No children$560$6007.14%
One child$3,733$3,9957.02%
Two children$6.164$6,6047.14%
Three+ children$6,935$7,4307.14%

Education Tax Breaks

There are two types of education credits, the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC).

American Opportunity Tax Credit (AOTC)Lifetime Learning Credit (LLC)
Modified Adjusted Gross Income – Single$80,000 to $90,000$80,000 to $90,000
Modified Adjusted Gross Income – Married, filing jointly$160,000 to $180,000$160,000 to $180,000
Maximum credit$2,500$2,000
RefundableYes, up to 40% of creditNo
Eligible expensesCourse-related books, supplies, and equipmentCourse-related books, supplies, and equipment only if paid to the institution as a condition of enrollment
Years of eligibilityCan only be claimed for four years

Must be within the first four years post-secondary study
No limit
Enrollment requirementsEnrolled at least half-timeEnrolled in at least one course
Criminal record restrictionsNo felony drug convictionsNo restrictions

As with all the above strategies, we highly encourage you to discuss any strategies with your accountant before implementation.  This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice.  You should consult with your own tax, legal, or accounting advisor before engaging in any transaction.