Happy New Year! Welcome to another tax season. The IRS announced that the 2023 tax season will start on Monday, January 23. The IRS will begin accepting paper and electronic tax returns that day. The filing deadline to submit your 2022 tax returns or an extension to file and pay tax owed is Tuesday, April 18, for most taxpayers. Here are what you need to know for tax season 2023 and looking ahead to 2024.
Charitable Deductions
During COVID, taxpayers who did not claim itemized deductions could take up to a $600 charitable donation tax deduction on their tax returns. However, in 2022, those who take a standard deduction may not take an above-the-line deduction for charitable donations.
Long-Term Capital Gains and Dividends
In 2023, tax rates on capital gains and dividends remain the same as 2022 rates (0%, 15%, and a top rate of 20%); however, threshold amounts have increased: the maximum 0% rate amounts are $44,625 for individuals and $89,250 for married filing jointly. For an individual taxpayer whose income is at or above $492,300 ($553,850 married filing jointly), the rate for both capital gains and dividends is capped at 20%. All other taxpayers fall into the 15% rate amount (i.e., above $44,625 and below $492,300 for single filers).
Clean Vehicle (EV) Tax Credit
Starting January 1, 2023. Vehicles eligible for the Clean Vehicle Tax Credit now include both EVs (electric vehicles) and FCEVs (fuel cell electric vehicles) but must meet two requirements to be eligible for the tax credit – The critical minerals component and the battery components requirements. Vehicles meeting both requirements are eligible for a nonrefundable tax credit of up to $7,500; however, there are additional requirements regarding manufacturer suggested retail price (MSRP) thresholds for modified adjusted gross income (MAGI).
Tax Reporting on Form 1099-K
For tax year 2022, the existing 1099-K reporting threshold of $20,000 in payments from over 200 transactions will remain in effect. The IRS requires taxpayers to report all income on their tax return, whether they received a Form 1099 or not. Taxpayers should continue to track and report their taxable income from all sources electronic and non-electronic.
Student Loan Forgiveness
In 2022 the U.S. Department of Education initiated a Student Debt Relief Plan seeking to cancel $10,000 of student loan debt for millions of eligible students and $20,000 for eligible Pell grant recipients. If this program is implemented, the forgiven debt would not be taxable because the American Rescue Plan Act excludes canceled student loan debt from taxation. The future of this plan is uncertain, however, as opponents have filed court challenges alleging that the administration was seeking to unconstitutionally exercise Congressional power. The U.S. Supreme Court has agreed to hear this challenge on February 28, 2023.
Refunds may be smaller in 2023
Taxpayers will not receive an additional stimulus payment with a 2023 tax refund because there were no Economic Impact Payments for 2022. In addition, taxpayers who do not itemize and take the standard deduction won't be able to deduct their charitable contributions.
Thank you for choosing Sharon Huang CPA to assist with your tax preparation and filings. We look forward to working with you again.
