There have been Tax Law changes that may impact your 2023 tax return. As you review the following changes, I encourage you to contact me if you want to discuss any of these matters. I will make sure I am available if you have any issues as you gather your tax documents for next year.
Tax Pro Account
I have recently established a Tax Pro Account with the IRS, which will give me the authorization to manage your tax information and allow me access to your tax accounts. I will be able to view and send POA and TIA requests directly to your online accounts. This will avoid faxing, mailing, and uploading information and will eliminate long processing times. The IRS is committed to improving and expanding the Tax Pro Account Partnership to enable me to provide the tools to address tax-relevant issues quickly on your behalf.
VA Tax Law Changes
The State standard deduction has increased to $17,000 (joint filers) & $8,500 (single filers) effective January 1st, 2024. The VA’s military Basic Pay subtraction is up to $15,000 and can be claimed for 2023 regardless of age. Under prior law, subtractions were only allowed for certain military benefits received by an individual aged 55 or older. These Military Benefit subtractions are increased to $20,000 in 2023, $30,000 in 2024 & $40,000 for 2025 for retirees over age 55; Also, House Bill 6001 continues to allow individual income tax rebates of up to $200 for a single taxpayer, or up to $400 for taxpayers filing a joint return. These tax rebates are allowed up to the resulting tax liability on your state tax return.
Contributions to an IRA
Contributions to an IRA will increase to $7,000, up from $6,500. The IRA catch-up contribution limit for individuals aged fifty and over remains $1,000 for 2023-24.
Nonbusiness Energy Property Credit
Effective in 2023, the Nonbusiness Energy Property Credit is renamed the Energy Efficient Home Improvement Credit. The credit is increased to 30% of the cost of improvements but is limited to energy-efficient improvements of $1,200 per year. Residential energy property (window/skylights) expenses are limited to $600 per year.
Estate and gift tax exemption
Estate and gift tax exemption amount increased to $10 million for 2023, however, please be aware that without congressional action the exemption will drop to the pre-2017 level of $5 million starting in 2026. You may want to consider moving assets out of your estate through tax-free gifting.
Mileage Rate/Child Tax Credit/Business Meals
The standard business mileage rate is increased to 65.5 for 2023; Child Tax Credit increased to $2,000 and a new $500 Credit was established for Other Dependents; Child Tax Credit increased to $3,000 ($3,600 for children under age 6); De minimis meals limits, which are related eating facilities, and meals for the convenience of employers are decreased from 100% to 50%. However, Business meals that are purchased in a restaurant remain at 100%
Wash Sale Rules
Wash Sale Rules disallow a loss realized by a taxpayer on a sale of stock or securities within a period beginning 30 days before and ending 30 days after the date of sale. The wash sale is triggered when the taxpayer acquires identical stock or securities. This prevents taxpayers from claiming losses on stocks that decreased in value and which the taxpayer intends to keep. I track all capital losses and loss carryovers prior to 2023 and can help you or your advisor with security sale decisions that you may or may not need to make before the end of the tax year.
Catch-up contributions
Catch-up contributions made by higher-income participants in 401Ks and similar retirement plans must be designated as after-tax Roth contributions. At the same time, the IRS also clarified that plan participants who are age 50 and over can continue to make catch-up contributions after 2023, regardless of Starting in 2024, the new Roth catch-up contribution rule applies to an employee who participates in a 401(k), 403(b) or governmental 457(b) plan and whose prior year Social Security wages exceeded $145,000.
QCD Transfers must be made before the end of the year
Both the taxpayer and the spouse over age 70 1/2 can each transfer $100,000 to a qualified charity. Also, if you are age 72 the transfers will count towards your RMD distribution. The accounts must be set up by an IRA Trustee before year-end and are required to be paid directly from the trustee account to the charitable organization. The QCDs are required to be reported on your tax return and a written acknowledgment is required from the charitable organizations.
Clean Electric Vehicles limitations
You can receive up to $7,500 in tax credits for purchasing a new electric vehicle after 8-6-22 for vehicles that have a gross vehicle weight rating of less than 14,000 pounds. No credit is allowed when the MSRP exceeds $80,000 for most vehicles and MFJ income over $300,000. No credit shall be determined under the current law with respect to any vehicle acquired after December 31, 2032.
Phishing (email sent by fraudsters) or Smishing (A text or smartphone SMS message sent by scammers)
- Individuals should never respond to tax-related messages or click on the URL link. Instead, the frauds should be reported by sending an email or a copy of the text/SMS as an attachment to phishing@irs.gov. The report should include the caller ID (email or phone number), date, time, and time zone, and the number that received the message. Please notify me if any of these occur and I will use the foregoing Tax Pro Account to alert the IRS at no charge to you.
