02 May Navigating Changes to Tax Laws in 2023
Navigating Changes to Tax Laws in 2023
Every year brings about some changes to tax laws. Some of these changes are minor, or only impact a small percentage of taxpayers, while other tax law changes are more sweeping and have a broader reach. In 2023, there have been several changes to the tax code that you should be aware of, so that you can better plan for your taxes throughout the year. Here are a few of the most significant tax law changes happening this year, as well as some tips on how to best navigate these changes.
Changes to Individual Tax Rates
Most years, tax law changes will include some adjustments to tax brackets and individual tax rates. Despite how common these changes are, it’s still important for taxpayers to be aware of and plan for these changes. This year, income tax brackets for each tax rate have been adjusted for inflation, while the top tax rate remains at 37%. The tax rates and applicable tax brackets for 2023 are outlined in the table below.
|Tax Rate||Single Filers||Married Couples Filing Jointly||Heads of Households|
|10%||$0 to $11,000||$0 to $22,000||$0 to $15,700|
|12%||$11,000 to $44,725||$22,000 to $89,450||$15,700 to $59,850|
|22%||$44,725 to $95,375||$89,450 to $190,750||$59,850 to $95,350|
|24%||$95,375 to $182,100||$190,750 to $364,200||$95,350 to $182,100|
|32%||$182,100 to $231,250||$364,200 to $462,500||$182,100 to $231,250|
|35%||$231,250 to $578,125||$462,500 to $693,750||$231,250 to $578,100|
|37%||$578,125 or more||$693,750 or more||$578,100 or more|
|Source: Internal Revenue Service|
It’s also worth noting that the standard deduction for taxpayers has risen for 2023. Here are the new standard deduction amounts:
- For single filers: $13,850 (an increase of $900)
- For married couples filing jointly: $27,700 (an increase of $1,800)
- For heads of households: $20,800 (an increase of $1,400)
Knowing all of this information early on in the year can help you to better plan for your taxes as you make important financial decisions throughout 2023.
Changes to Retirement Accounts
This year has also brought about several changes to retirement accounts, as most new tax years do. For 2023, the contribution limit for 401(k) plans and other defined contribution plans increased from $19,500 to $20,500. For those 50 or older, the additional catch-up contribution limit also increased from $6,500 to $7,000. Assuming you contribute to one of these retirement plans (and you really should be), it’s important to reexamine your current contribution rates and consider increasing them to take advantage of the higher contribution limits.
Changes to Business Expenses
In 2023, meals expenses drop back to being 50% deductible as the COVID relief bills expire which had allowed a significant number of meals to be 100% deductible. In addition, bonus depreciation is now limited to 80% of qualified fixed assets for 2023, compared to 100% in 2022.
Schedule a Tax Planning Consultation
At The Accounting Guys, we understand that navigating changes to tax laws can be difficult. That’s why we offer tax planning services in Provo to help our clients better understand how these changes affect them, and provide guidance on how to minimize their tax liability year after year. Contact us today to schedule a consultation with one of our experienced tax planners.