Tax Tips for Everyone is created to provide updates on current tax topics and increase understanding of terms and issues on income and other taxes.
Child Tax Credit
The Child Tax Credit for 2022 & 2023 returned to the prior level of $2000 for a child under age 17. For a child over the age of 17 who is still a dependent or another person like a parent or grandparent who might qualify as a dependent there is the $500 Other Dependent Credit.
SECURE Act 2.0
The SECURE Act 2.0 passed by congress in December of 2022 brought numerous changes.
- RMDs – The age when Required Minimum Distributions (RMDs) are required was raised for traditional IRAs and 401K type retirement accounts to age 73 (up from 72). The requirement will increase to age 75 in the year 2033. The penalty for failing to take an RMD is decreased to 25% of the RMD amount (down from 50%) and only 10% if the error is corrected in a timely manner. Beginning in 2024, RMDs are no longer required from Roth accounts in employer retirement accounts.
Always remember to specify the beneficiaries in the documentation of an IRA, 401K or other retirement account. Naming beneficiaries simplifies the transfer and keeps it outside the estate probate process. A Will cannot override the documentation in the retirement account. Be sure to update the beneficiaries if there is a change due to divorce, death of a beneficiary or other event.
- QCDs – Beginning in 2023, the options were expanded for using a Qualified Charitable Distribution to transfer funds directly from and IRA or 401K. The types of charities and trusts who could receive the funds was expanded, however not all charities qualify. A QCD allows a person to transfer retirement account funds directly to churches, charities and trusts. No income tax is typically paid on funds transferred properly from the retirement account.
- 529 Plans – After 15 years, 529 education plan assets can be rolled over into a Roth IRA for the beneficiary of the plan, subject to annual Roth contribution limits and an aggregate limit of $35,000. Other rules may also apply.
Solar and Electric Vehicle Credits
Congress increased the credit for installing many solar energy products to 30% (up from 26%) and extended it until 2032. Also, a new, qualified plug-in electric vehicle (EV) bought in 2022 or before, may provide eligibility for a clean vehicle tax credit up to $7,500.
Be sure to check with your accountant or financial advisor about how these and other provisions of the SECURE Act and other tax changes apply to you.
Contributions Limits Increased in 2023
The contribution limits for Traditional IRAs and Roth IRAs increased to $6,500 and for 401Ks the limit increased to $22,500. Health saving account contribution limits is $3,850 for individuals and $7,750 for families.
Free Tax Filing / Assistance
Most taxpayers with an adjusted gross income of less than $73,000 may file their federal tax return for free. See the IRS Free File: Do your Taxes for Free website for more information. Many qualify for assistance preparing their tax return through the Volunteer Income Tax Assistance (VITA) program. See the Get Free Tax Prep Help website to learn if you qualify.
Due Date
The deadline for filing a 2022 tax return is Tuesday, April 18, 2023, unless impacted by a natural disaster. Check with your tax preparer or the IRS for any extension in your area.
Standard Deduction for 2022 & 2023
| Filing Status | 2022 Tax Year | 2023 Tax Year | 2023 age 65 or older |
|---|---|---|---|
| Single or Married filing separately | $12,950 | $13,850 | $14,700 |
| Married, filing jointly | $25,900 | $27,700 | $28,700* |
| Head of household | $19,400 | $20,800 | $21,150 |
*when both spouses are 65 or older
Federal Income tax Brackets for 2022 and 2023
Income Tax Brackets and Rates in 2022 (for taxes due April 18, 2023)
| RATE | Taxable Income (single) | Taxable Income (Joint) |
|---|---|---|
| 10% | $0 to $10,275 | $0 to $20,550 |
| 12% | $10,276 to $41,775 | $20,551 to $83,550 |
| 22% | $41,776 to $89,075 | $83,551 to $178,150 |
| 24% | $89,076 to $170,050 | $178,151 to $340,100 |
Additional rates for 32%, 35% and 37% not listed
Income Tax Brackets and Rates in 2023 (for taxes due April 15, 2024)
| RATE | Taxable Income (single) | Taxable Income (Joint) |
|---|---|---|
| 10% | $0 to $11,000 | $0 to $22,000 |
| 12% | $11,001 to $44, 725 | $22,001 to $89,450 |
| 22% | $44,726 to $95,375 | $89,451 to $190,750 |
| 24% | $95,376 to $182,100 | $190,751 to $364,200 |
Additional rates for 32%, 35% and 37% not listed