What to Know About Income Tax in 2023
President Biden signed the Inflation Reduction Act into law in August of 2022. This means various changes will take effect in the 2023 fiscal year, prompting corporations and individuals to review and understand the key changes. Here are a few key takeaways for you to know.
Changes to Income Tax Brackets and Rates
One of the changes set to impact a large number of taxpayers in 2023 is the shift in tax brackets and the changed tax rates for each bracket. For example, in 2022, the top tax bracket began at $539,900 for individual tax filers or $647,850 for married couples with a joint return. The tax rate for this bracket was 37%. With these new changes, the top tax bracket in 2023 will include individuals earning $400,000 or more for the year or married couples earning $450,000. The new tax rate for this bracket is 39.5%. With these changes, more individuals will fall into the top bracket and pay a higher tax rate than last year.
With bracket cutoffs shifting and rates changing, understanding the amount of tax you’ll be responsible for paying in 2023 can be confusing. Working with tax and accounting professionals can help you prepare for your payments and ensure you pay the correct amount in taxes. Tax professionals at Paramount are friendly and educated on the latest changes to help guide you through your tax questions this year.
Increased Deductions
A few key deductions are expected to see increases in 2023 compared to last year. For example, the foreign–earned income exclusion is increasing to $120,000 compared to the previous year’s $112,000. Likewise, the annual exclusion for gifts last year was $16,000, while this year’s exclusion will be $17,000.
Tax Credits and Rebates
Homeowners who add wind or solar power systems to their homes are eligible for up to a 30% tax credit. Rebates are available for homeowners who purchase HVAC systems, heat pumps, and water heaters that are energy–efficient. In addition, rebates will be available for electric vehicle purchases that fall within a specified price range and for individuals earning less than $150,000 per year (or married couples earning less than $300,000). The “clean” or hydrogen fuel car must be assembled in North America to qualify. Qualifying trucks and SUVs cost no more than $80K, and other qualifying cars must cost $55K or less. For qualifying purchases, a $7,500 rebate will be applied at the point of sale.
Finding Qualified Tax Professionals
Accurately filing your taxes can feel overwhelming and complicated, especially when laws and credits change year after year. Whether you’re an unmarried individual in a salaried position, a married business owner, or a head of household managing investments, you may need help to file your income taxes for 2023 correctly.
Large accounting firms can feel impersonal and paint with a broad brush. Instead, Paramount offers one–on–one services with friendly, qualified tax professionals to help accurately prepare your individual or your business taxes. Ask for a FREE tax review today!