Tax Changes for 2023 - Be Aware

Changes for 2023 you ask!

Not many other than inflationary items.

The Inflation Reduction Act didn't change the tax rates (10, 12, 22, 24, 32, 35 or 37% brackets) but did increase the income range within those brackets. So even if you earned more in 2023, you might still be in the same bracket. Also, contained within this same Act, the income thresholds for Capital Gains changed, in your favour. The income range was increased anywhere from 3K to 6K US$ to help keep you within the zero % bracket of taxation. Standard deductions also increased for all. This makes it so that we should again look at your Charitable Contributions and how those are used for your good by possibly alternating the year in which you contribute to your favourite Charities.

Solar & Energy Credits

For those considering Solar and other energy efficient items, the Inflation Reduction Act also kept the credit for solar installations at 30% through the year 2032. These credits are also for battery storage devices that have at least 3 kilowatts. Going green (water heaters, doors, windows etc.) will get you a larger credit, 30% now, and the cap is increased from 500US$ to 1200US$ for most items. Clean vehicle credits are still available with a cap at 7500US depending on the type of vehicle you bought after 17 April 2023. There are constraints on pricing caps and types of vehicles that qualify. Please make sure that you check with against the Government's approved list of vehicles before purchasing any EV.

1099 Issuance

If you use Venmo or Paypal, Zelle or other third party network pay companies, the IRS is going to enforce the rules enacted that require them to send out 1099K if you received more than 600US from them. This was supposed to be enforced in 2022 but the IRS complained about too much paperwork and so it was postponed and now postponed again. The change is coming so make sure you are compliant on your 1099s.

Now for all of you age 70 and above.

The age for taking your RMD has increased again. It is now up to 73 years old if you turned 72 after 2022. So for those of you that qualify, your first RMD is not required to be taken by 1 April of 2024. Always check with your financial advisor to make sure you are following the rules based on your age and situation. Continuing in the retirement vein, the contribution amounts for all have increased. Also phase out levels for those that contribute have increased giving taxpayers a better chance at being able to deduct contributions made during the year.

Mileage Rates

Last item to bring up is that mileage has increased to 65.5 cents a mile for business and 22 cents for medical. Charity has stayed the same at 14 cents a mile.

Business Owner Items

For Small Business Owners, the 179 deduction is reduced from 100% to 80% for assets that have a life less than 20 years. Meals are back down at 50% deduction, rather than the temporary 100% for 2022. The QBI cap is raised to allow you to deduct more of your income.

The new IRS agents are allowing other agents to focus on some big money items. They are looking at Businesses, especially partnerships, that use the income and expenses there to pass through losses to individuals on their personal returns. It is key that you examine your business income and expenses for any Partnerships, SMLLCs, SCorps and more you are involved in. Make sure you know what your income and expenses were and keep all personal items outside of the business. We have encouraged for years to have separate business and personal bank accounts (Checking, Savings, Credit Cards and more). Do NOT mix personal with business. Keep it clean by keeping it separate.