A lot has changed with tax laws this year. This will affect how you can reduce your tax debt, where you can move things around to your benefit, and what you owe. You can’t change your capital gains tax liable after the year ends. Now is the time to plan for 2023 tax returns so you don’t get costly surprises when it’s time to file next year for what you did this year.
You could save more than you might imagine. Talk to your tax professional. He or she may be able to find ways to move money around to save you thousands and/or reduce your AGI taxable income. It’s incredibly important that you address this now. You don’t want to pay any more taxes than you have to.
Changes to standard deductions
Numbers are going up in almost all categories for the standard deduction. In 2022 (that’s for the personal tax returns you’ll be filing in April 2023), the deduction goes up to $19,400 for head of household, $25,900 for joint filers, and $12,950 for those married but filing separately or single filers. That’s up from $18,800, $25,100, and $12,550 respectively.
Increases slated for 2023 are even higher. Individuals will see a $900 standard deduction increase to $13,850. Married filing jointly will go up to $27,700, an $1,800 increase over 2022. Head of household returns will see a $1,400 increase to $20,800.
There will be changes to the tax brackets too. These will change significantly in 2023. The new rackets for when you file in 2024 for your 2023 returns are as follows:
- Individuals with income below $11,000 and married filing jointly with income of $22,000 will pay 10%
- $11,000 – $44,724 pays 22% as individuals; Married with $22,000 to $89,449 will pay 12%. This is an increase of $725 and $1,450 respectively from 2022 thresholds.
- 22% will be applied to individuals making up to $95,374 and married filing jointly couples making up to $190, 749. This is an increase of $2950 and $5,900 respectively.
- Those owing 24% can make up to $182,099 as individuals, or $364,199 for married couples; going up from 2022 by $6,300 and $12,600.
- Additional tax brackets are 32%, 35% and 37%. Top earners will now owe the maximum amount on income over $578,125 for individuals and $693,750 for couples filing jointly. This is an increase of $38,225 and $45,900 from the prior years.
Capital Gains Adjustments
The picture has also changed for capital gains tax liability come 2023. For the 2022 year, most net capital gains are no higher than 15%. If your taxable income is less than $40,000 for single filers or $80,800 married filing jointly or you’re a qualifying widow or widower, this may be taxed at 0%.
In 2023 that all changes. Individuals earning below $44,625 and joint filers at the $89,250 or below income range will still owe 0%. The 15% kicks in for up to $492,330 and $553,850 respectively. Earners bringing more than that will now owe 20%.
Small changes in your income can make a big difference in what you owe. Fortunately, there a lot of ways you can adjust what your claimed income is, so long as you take action prior to year end.
The point is, there’s nothing you can do to change your income after the tax year ends. That’s why it’s important to check in with someone who understands both tax law and investing during the months of November or December. Chances are, they’re pretty busy with other clients trying to do the same thing, so it makes sense to schedule this session as early as possible. The savings you realize as a result of this brief meeting could be substantial. Do your tax planning now 2022, 2023 returns and beyond as little adjustments applied now can make a big difference in what you owe.