What You Must Know About New IRS Tax Laws For 2023

When you have a problem with the IRS, it is understandable if you are intimidated. Also, understanding the latest tax laws can be confusing, and this article will describe the latest IRS tax laws for 2023.  If you have an IRS tax problem or questions about the 2023 law changes, our IRS tax lawyers in Schaumburg at North Suburban Legal Services can help.

Tax Bracket Changes

The IRS increased tax brackets by 7% for every type of filer for this year, including those who file separately or as married couples. The top marginal rate is still 37% for single taxpayers with incomes above $578,125 or married couples above $693,750.

The lowest tax bracket is 10%, which affects those with incomes of $11,000 or less or a married couple earning $22,000 or less.

Standard Deduction Increase

The standard deduction is popular for people who do not itemize their taxes, lowering the income you pay your taxes on. For a married couple filing jointly, the standard deduction in 2023 is $27,700, an increase from $25,900 in 2022. This is a 7% increase.

For single taxpayers and married couples filing separately, the standard deduction is $13,850 for 2023, which was $12,950 last year. This is an increase of 6.9%. The standard deduction for heads of households in 2023 rose to $20,800 from $19,400 last year, a 7.2% bump.

However, tax experts note that itemizing your deductions will be more difficult this year. So, your tax payments, mortgage interest, and charitable contributions may not provide tax benefits next time you file your taxes.

Most taxpayers use the standard deduction significantly after tax law changes in 2017 under the Trump Administration. Only about 14% of taxpayers still itemize their taxes after the 2017 Tax Cuts and Jobs Act, there was a 17% drop from before the law was enacted.

Earned Income Tax Credit

The maximum income for households claiming the Earned Income Tax Credit is $7,430 for those with at least three kids. This compares to $6,935 last year.

Capital Gains Tax Brackets

Capital gains are the profits we make from investments and other assets. They are taxed with different brackets and tax rates than regular income. The income thresholds for these taxes were changed in the 2023 tax law.

For example, in 2022, a single taxpayer who made under $41,675 was not required to pay capital gains taxes on their various investments. But this year, the threshold rose about 7% to $44,625. A single taxpayer who earns more than that must pay a 15% capital gains tax. Those who make over $492,300 this year must pay a 20% capital gains tax.

Larger Gift Exclusion

If you like to give gifts to reduce taxes, you are in luck with the 2023 tax law changes. You can give up to $17,000 in gifts this year, up from $16,000 in 2022.

Estate Tax

The estates of wealthy Americans also will get a more significant break this year. The IRS exempts up to $12.92 million from estate taxes, an increase from $12.06 million last year.

Flexible Spending Accounts (FSAs)

Having a flexible spending account allows you to put money, up to certain IRS limits, into an account for medical expenses. The funds are removed on a pre-tax basis, so it is a tax-savings vehicle for many people.

This year’s new limit for flexible spending account contributions is $3,050, up from $2,850 in 2022. But most workers establish their FSA limits each fall. Workers would have had to set the higher amount at the end of last year to take advantage of the new, higher limit.

How To Lower Your Taxable Income In 2023

With the new tax law changes, you may wonder how to save when you file your taxes next year. There are several effective strategies to lower your federal tax burden listed below. Have questions? Our IRS tax lawyer in Schaumburg can answer them.

Contribute To Your 401(k) Or IRA

One of the simplest ways to lower your taxable income is by putting money into a retirement account, such as a 401(k) or IRA. You do not pay taxes on the money when you contribute it, only when you take it out years from now.

Suppose you have a $50,000 salary and a 25% tax bracket. If you put 5% of your salary into the 401k(k), the taxable income drops from $50,000 to $47,500. This will result in your paying less taxes in 2023.

Deduct Your Business Expenses

If you are self-employed, business expense deductions can save you considerably on taxes. Most business-related expenses can be deducted at tax time, reducing your taxable income considerably. Some of the most common deductions are:

  • Property rental: If you rent an office to run your business, you can use a business deduction for the same year you pay rent.
  • Home office: If you use part of your house for your home office, you should take advantage of the home office deduction.
  • Mileage: You can deduct the mileage when you drive your vehicle for business reasons. The mileage rate in 2023 was 65.5 cents per mile. If you do a lot of driving to meet clients, the mileage deduction can save you a lot on taxes.
  • Office supplies: You can deduct your office supplies, such as printer paper, ink, staplers, folders, and much more.
  • Phone and Internet: If you use the phone and Internet for business, you can write off this expense.
  • Travel expenses: If you travel for business, you can write off flight costs, train and bus tickets, meals, lodging, and more.

Contact Our IRS Tax Lawyers In Schaumburg

The tax system is confusing and changes yearly; 2023 was no exception. It can be easier to understand the recent tax changes with legal advice. Also, if you have an IRS tax problem, do not attempt to solve it alone. The better solution is to engage an IRS tax lawyer in Schaumburg at North Suburban Legal Services, so call (312) 909-6089.




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