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What's New For 2023

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The standard deduction increased

 

After an inflation adjustment, the 2023 standard deduction increases to $13,850 for single filers and married couples filing separately and to $20,800 for single heads of household, who are generally unmarried with one or more dependents. For married couples filing jointly, the standard deduction rises to $27,700.

Itemized deductions remain mostly the same:

 

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 indebtedness. 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.

IRA and 401(k) limits

Individuals can contribute up to $6,500 to an IRA, and those age 50 and older also qualify to make an additional $1,000 catch-up contribution. In addition, the 2023 contribution limits for tax-deferred 401(k)s and Roth 401(k)s have increased to $22,500. If you're age 50 or older, you qualify to make an additional $7,500 catch-up contribution for this tax year as well.

The Child Tax Credit:
In 2023, the Child Tax Credit is $2,000 per child under age 17 or younger at the end of year.
 
Earned income tax credit

If you worked or were self-employed and had earned income

under $63,698, you could receive the Earned Income Tax Credit (EITC)

1 by filing a tax return. If you are eligible for this credit, the maximum amount you could receive is:

  • $600 if you have no dependent children

  • $3,995 if you have one qualifying child

  • $6,604 if you have two qualifying children

  • $7,430 if you have three or more qualifying children.

 

Don't get caught off guard

If you're age 73 or older, make sure you've taken your required minimum distribution (RMD) from your retirement accounts before the end of the year or else you face a 25% penalty on any undistributed funds (unless it's your first RMD, in which case you can wait until April 1, 2024).

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