Tax season is here again! Before you start stressing over those forms, though, read this guide for what you need to know about filing taxes in 2023.
Dates to know
Take a note of these important dates as you start preparing your 2022 taxes.
- The tax filing deadline is April 18, 2023.
- The extension deadline is Oct. 16, 2023.
Make sure you have all the forms and information you need well in advance so you can get your return filed in time.
Changes to the tax code
Here are some important tax code changes to note as you prepare to file.
- Changes to the income tax brackets. The income ranges for each of the seven tax brackets have increased to account for inflation. Visit irs.gov to ensure you’re filing correctly.
- Increase in the standard deduction. The 2022 standard deduction increased to $12,950 for single filers, $19,400 for single heads of household and to $25,900 for married couples filing jointly.
- Decrease in charitable deductions. The deductions for gifts and donations to public charities in 2022 are limited to 30% of Adjusted Gross Income (AGI) for contributions of non-cash assets if held for more than one year, and to 60% of AGI for cash contributions.
- Increase in Health Savings Account (HSA) contributions. For 2022, the maximum you can contribute to an HSA is $3,650 for an individual and $7,300 for a family. Individuals age 55 and over can contribute an additional $1,000.
- Decrease in the Child Tax Credit. Tax credits, which decrease your tax liability dollar for dollar, are more desirable than tax deductions. The Child Tax Credit was temporarily bumped up in 2021 as part of the American Rescue Plan Act (ARPA). In 2022, the credit returns to $2,000 for children aged 16 and younger. The credit phases out at an AGI of $400,000 for joint filers and $200,000 for single filers. For other qualified dependents, you can claim a $500 credit.
- Decrease in the Earned Income Tax Credit (EITC). The EITC returns to $500 for eligible taxpayers with no children.
- Decrease in the Child and Dependent Care Credit. In contrast to the $8,000 credit of 2021, the Child and Dependent Care Credit returns to a maximum of $2,100 in 2022.
- Increase in estate tax exemption. This exemption, indexed to inflation, increases to $12.06 million for 2022.
- Increase in the annual gift exclusion. In 2022, you can give money to your loved ones without incurring tax liability, or use up any of your lifetime estate and gift tax exemption, up to $16,000 per recipient (up $1,000 from 2021).
Tax code information to know
Other parts of the tax code that are important to know and haven’t changed much for 2022 include the following:
- Itemized deductions-for most filers, it makes more sense and is simpler to take the higher standard deduction. However, if you have lots of tax-deductible expenses, you may benefit from itemizing your deductions.
- State and local taxes-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 debt. However, people who had $1,000,000 of home mortgage debt before Dec. 16, 2017 will still be able to deduct the interest on that loan.
- Medical expenses-only medical expenses that exceed 7.5% of AGI can be deducted in 2022.
- Miscellaneous deductions-no miscellaneous itemized deductions are allowed.
Don’t forget to maximize your retirement contributions for 2022:
- The deduction limit for 401(k) contributions for 2022 is $20,500, or $27,000 if you’re over the age of 50.
- The maximum tax deductible contributions for IRAs is $6,000, or $7,000 if you’re over the age of 50.
Tax time can be stressful, but you don’t have to go it alone. Use this guide for a smooth, stress-free tax season.
Your Turn: Have you already filed your tax return? Share your best tips with us in the comments.
Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.
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