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New laws

In a nutshell what are the primary items to watch out for in the coming tax year for the middle class ( less than 90,000 per year)

2 Replies
conniem123
Employee Tax Expert

New laws

Hi elath1169,

 

Not a lot of changes for tax year 2023.  

 

You will see an increase in the standard deduction, if you do not itemize;

Standard deduction increases as follows:

  • Filing status of Married Filing Jointly increases by $1,800 to $27,700
  • Filing status of Head of Household increases by $1,400 to $20,800
  • Filing statuses of Single and Married Filing Separately increases by $900 to $13,850

Also, if you have dependents the Child Tax Credit (CTC) remains at 2022 thresholds:

  • Nonrefundable credit
  • $2,000 per child who meets the following requirements:
    • Child is younger than 17 at the end of the year
    • Child is son, daughter, stepchild, foster child,brother, sister, stepbrother, stepsister, grandchild, niece, or nephew
    • Child can be claimed as a dependent
    • Child doesn’t provide more than half of their support
    • Child is U.S. citizen, national, or resident alien
    • Child doesn't file joint tax return
    • Child must have social security number
    • Child must have lived with you for more than half of the tax year
  • Additional Child Tax Credit (ACTC) encompasses the following:
    • Allows taxpayer to receive up to $1,500 of the $2,000 child tax credit as a refund
    • Families must have minimum of $2,500 of earned income to claim ACTC
  • Phase out for both credits is based on modified adjusted gross income (MAGI) as follows:
    • Filing status of Married Filing Jointly phase out begins at $400,000
    • All other filing statuses phase out begins at $200,000
  • Phase out is calculated as $50 reduction in the credit for each $1,000 (or part of $1,000) that MAGI exceeds the phase out amount.

Also there have been changes to the energy efficient home improvement credit;

Maximum value of $1,200 per year for qualified energy efficiency improvements, such as:

  • Exterior windows
  • Doors and skylights
  • Building envelope components

 

Second, there is a different $2,000 per limit for the equipment cost and installation of new energy-intensive appliances, such as:

  • Heat pumps
  • Heat pump water heaters
  • Biomass stoves and boilers

 

Third, as part of the $1,200 credit per year, it can cover up to $150 per year for the cost of performing a home energy audit to identify areas of needing energy efficiency improvements.

 

I hope you find this helpful!

Connie

 

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rschule1
Expert Alumni

New laws

Hi There:

 

Here's a real good article by Kiplinger which outlines the major changes to 2023, the biggest changes being changes to Income Tax Rates , Capital Gain Rates and energy credits.

 

2023 Tax law changes 

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