What are the tax changes for this year?

For the tax year 2023, several significant changes have been implemented:

1. Standard Deduction Increase:
   • Single or Married Filing Separately: $13,850
   • Married Filing Jointly or Qualifying Surviving Spouse: $27,700
   • Head of Household: $20,800
2. Additional Child Tax Credit:
   • The maximum additional child tax credit amount has increased to $1,600 for each qualifying child.
3. New Clean Vehicle Credit:
   • The credit for new qualified plug-in electric drive motor vehicles has been renamed to the clean vehicle credit, with changes to the maximum amount and requirements for claiming the credit.
4. Previously Owned Clean Vehicle Credit:
   • This new credit is available for previously owned clean vehicles acquired and placed in service after 2022.
5. IRA Contribution Limits:
   • The IRA contribution limit has increased to $6,500 ($7,500 for individuals age 50 or older).
6. Deferred Compensation Contribution Limits:
   • For 401(k) plans, 403(b) plans, or the federal government’s Thrift Savings Plan, the total annual contribution limit has increased to $22,500 ($30,000 if age 50 or older).
7. Required Minimum Distribution Age:
   • The required beginning date for the first required minimum distribution is now April 1, 2025, for individuals reaching age 72 in 2023.
8. Qualified Charitable Distribution One-Time Election:
   • A one-time distribution up to $50,000 from an individual retirement account to charities through a charitable remainder unitrust or a charitable gift annuity is now allowed.
9. Self-Employed Health Insurance Deduction:
   • The deduction is now calculated using Form 7206 instead of Pub. 535.
10. Direct File Pilot Program:
    • The IRS is implementing a Direct File pilot during the 2024 filing season, allowing eligible taxpayers in 13 states to prepare and electronically file their 2023 federal tax returns directly with the IRS for free.
11. Health Flexible Spending Arrangements (FSAs):
    • The dollar limitation on voluntary employee salary reductions for contributions to health FSAs is $3,050.
12. Temporary Business Meal Deduction:
    • The temporary allowance of a 100% business meal deduction for food or beverages provided by a restaurant has expired.
13. Disaster Tax Relief:
    • Special rules for tax-favored withdrawals and repayments now apply to disasters occurring on or after January 26, 2021.
14. Exception to the 10% Additional Tax for Early Distributions:
    • New exceptions include distributions in connection with federally declared disasters, to terminally ill individuals, and to firefighters at age 50 or with 25 years of service.
15. Delayed Refund for Returns Claiming the Additional Child Tax Credit (ACTC):
    • Refunds for returns claiming the ACTC cannot be issued before mid-February 2024.
16. Standard Mileage Rates:
    • Business use of a vehicle: 65.5 cents per mile
    • Charitable organizations: 14 cents per mile
    • Medical reasons: 22 cents per mile
17. Modified Adjusted Gross Income (AGI) Limit for Traditional IRA Contributions:
    • The deduction for contributions to a traditional IRA is reduced (phased out) if the modified AGI exceeds certain thresholds.

These changes reflect updates to various tax credits, deductions, and filing requirements, aiming to accommodate inflation adjustments and new legislative measures.

Sources:
3. Annual Inflation-Adjusted Amounts
Test Your Knowledge of 2023 Tax Developments
Publication 4810 (11/2023)
Rev. Proc. 2023-34
Publication 17 (2023)
Notice 2023-2