2023 Key Tax Numbers

Tax Year: 2023

• Employees:
  • An employee's share of the Social Security tax withheld from gross wages is 6.2%. The employer's share of the Social Security tax on an employee's gross wages is also 6.2%. The combined Social Security tax rate is 12.4%.
  • The 2023 Social Security wage base is $160,200 (the maximum Social Security tax withheld should not exceed $9,932).
  • The employees share of Medicare tax withheld from gross wages is 1.45%. The employer's share of Medicare tax on an employee's gross wages is also 1.45%. The combined Medicare tax rate is 2.9%. Unlike the Social Security tax, there is no limitation on the amount of gross wages subect to the Medicare tax.
• Self-employed:
  • On Schedule SE for 2023, the Self-employment tax rate is 15.3%, which equals 100% of the Social Security rate of 12.4% plus 100% of the Medicare tax rate of 2.9%.
  • For 2023, the 15.3% rate applies to earnings from self-empoyment and wages from a job up to $160,200. Only 92.35% of self-employment earnings are subject to the 15.3% rate. For example, if net profit on Schedule C is $150,000, only $138,525 would be subject to the 15.3% rate (.9235 x $150,0000). (The .9235 rate is shown on Schedule SE, Part 1, line 4a.)
  • Unlike the Social Secutity wage base, which is the maximum gross earnings taxed for Social Security, there is no earnings limit for the Medicare tax; the 2.9% Medicare rate applies to 100% of gross earnings.
  • One-half of the self-employment tax is deductible. This is an above-the-line deduction, so you don't have to itemize your deductions to claim it. Enter this deduction on Schedule 1 (Form 1040 or Form 1040-SR), Part II, Line 15, "Deductible part of self-employment tax".
• Additional 0.9% Medicare Tax on Earnings:
• High income taxpayers whose income exceeds a threshold, depending on their filing status, are subject to an additional 0.9% Medicare Tax. If you're married and file a joint return, you must combine your and your spouse's wages, other compensation (i.e. tips, taxable fringe benefits, etc.) and self-employment income to determine if the threshold is exceeded (see chart below).
• If in 2023 you had only self-employment earnings and no wages, you figure your liability for the 0.9% tax in Part II of Form 8959, Additional Medicare Tax.
• If you had wages and tips or other taxable employee compensation treated as wages, but not earnings from self-employment, the 0.9% tax applies in Part I of Form 8959 to the excess wages over your filing threshold. For example, if your 2023 wages are $225,000 and you're single, the tax applies to $25,000, the excess wages over the $200,000 threshold, and a tax of $225 applies (.009 x $25,000). Report the $225 tax is reported as an additional tax on Schedule 2 whether or not your employer withheld the 0.9%. Withholdings for the 0.9% tax are separated out from regular Medicare withholdings on Part V of Form 8959 and then added to your federal incoome tax withholdings on Line 25c of Form 1040 or 1040-SR.
• If you had wages and net earnings from self-employment in 2023, do the following:
  • first determine if the 0.9% tax applies to your wages in Part I of Form 8959,
  • then reduce your threshold amount by your wages to get a reduced threshold amount that is used to determine if the tax applies to the self-employment income.
• A net loss from self-employment does not offset wages.
• The 50% deduction for self-employment tax does not apply to the 0.9% Additional Medicare Tax.

Threshold Amounts for the Additional 0.9% Medicare tax 2022

Filing Status	Threshold
Married filing jointly	$250,000
Married filing separately	$125,000
Single	$200,000
Head of household	$200,000
Qualifying widow(er)	$200,000

Tax Year: 2023

You can no longer claim a personal exemption for yourself, your spouse or your dependents.

Tax Year: 2023

• Married filing Joint return: $27,700
• Qualifying widow/widower: $27,700
• Head of household: $20,800
• Single: $13,850
• Married filing separately: $13,850
• Dependents - minimum deduction: $1,250
• Additional Deduction if Age 65 or Older, or Blind.
  Note: If you turned 65 on January 1, 2024, you are considered to be 65 as of December 31, 2023 for purposes of claiming this deduction. The larger deduction for blindness is allowed regardless of age.
  • Married: allowed for each-spouse, filing jointly or separately (if one spouse itemizes deductions, the other spouse must do the same):
    • $1,500 ($3,000 for age and blindness)
  • Qualifying widow/widower:
    • $1,500 ($3,000 for age and blindness)
  • Single or head of household:
    • $1,850 ($3,700 for age and blindness)

Tax Year: 2023

Tax Year: 2023

• Business: 65.5 cents per mile
• Medical and moving for military personnel: 22 cents per mile
  • This deduction only applies to members of the U.S. Armed Forces on active duty who move pursuant to a military order and incident to a permanent change of station.
• Charitable volunteers: 14 cents per mile

Tax Year: 2023

• Free parking, transit passes and van pooling: $300 per month

Tax Year: 2023

Tax Change:

The age cap on contributing to a traditional IRA has been repealed. Contributions to a traditional IRA for 2023 can be made as long as you have earned income (or other eligible income).

Traditional IRAs:

• Traditional IRA contribution limit: $6,500
• Additional contribution if age 50 or older: $1,000
• Deduction phaseout for active plan participant:
  • Single or head of household: $73,000 - $83,000
  • Married filing jointly, two participants: $116,000 - $136,000
  • Married filing jointly, one participant:
    • Participant spouse: $116,000 - $136,000
    • Non-participant spouse: $218,000 - $228,000
    • Married filing separately, live together, either participates:
      • $0 - $10,000
  • Married filing separately, live apart all year:
    • Participant spouse: $68,000 - $78,000
    • Non-participant spouse: no phaseout

Roth IRAs:

• Roth IRA contribution limit: $6,500
• Additional contribution if age 50 or older: $1,000
• Roth IRA Contribution limit phaseout range:
  • Single, head of household: $138,000 - $153,000
  • Married filing separately, live apart all year: $138,000 - $153,000
  • Married filing jointly, or qualifying widow/widower: $218,000 - $228,000
  • Married filing separately, live together at any time: $0 - $10,000

Tax Year: 2023

• 401(k), 403(b), 457 plans: $22,500
• Salary-reduction SEP: $22,500
• SIMPLE IRA: $15,500
• Additional contribution if age 50 or older (catch-up contributions):
  • 401(k), 403(b), governmental 457 and SEP plans: $7,500
  • SIMPLE IRA: $3,500

Tax Year: 2023

• American Opportunity credit limit-per student: $2,500
• Lifetime Learning credit limit-per-taxpayer: $2,000
• Phaseout of American Opportunity credit:
  • Married filing jointly: $160,000 - $180,000
  • Single, head of household, or qualifying widow/widower: $80,000 - $90,000
• Phaseout of Lifetime Learning credit:
  • Married filing jointly: $160,000 - $180,000
  • Single, head of household, qualifying widow/widower: $80,000 - $90,000
• Student loan interest deduction limit: $2,500
  • Phaseout of deduction limit:
    • Married filing jointly: $155,000 - $185,000
    • Single, head of household, qualifying widow/widower: $75,000-$90,000
• Coverdell ESA limit: $2,000
  • Phaseout of limit:
    • Married filing jointly: $190,000 - $220,000
    • All others: $95,000 - $110,000
  • Tuition and fees Deduction No Longer Allowed Beginning 2021:
    • Before 2021, you didn't have to itemize deductions to deduct tuition and fees for up to $2,000 or $4,000 of qualifying higher education tuition and fees, subject to an income limitation. This deduction was repealed for years after 2020.

Tax Year: 2023

• Limit on premium allowed as medical expense:
  • Age 40 or under: $480
  • Over 40 but not over 50: $890
  • Over 50 but not over 60: $1,790
  • Over 60 but not over 70: $4,770
  • Over 70: $5,960

Tax Year: 2023

Vehicle:

For a vehicle placed in service in 2023 and used over 50% for business, the first-year depreciation limit including bonus depreciation, is $20,200. If you elect to opt out of using bonus depreciation, or you're not eligible for bonus depreciation, the first-year depreciation limit is $12,200 (it excludes $8,000 bonus depreciation). (See "2023 Bonus Depreciation below".)

Qualifying Property:

For qualifying property placed in service in 2023, first-year expensing is allowed up to a limit of $1,160,000. The limit begins to phase out if the total cost of qualifying property exceeds $2,890,000.

Section 179 Deduction Phase-out:

If the cost of qualifying property placed in service in 2023 is more than $2,890,000, you reduce the $1,160,000 expensing limit dollar-for-dollar for each dollar the cost of qualifying property exceeds $2,890,000 (but not below zero).

For example, if you place machinery in service during 2023 costing $2,950,000, the $1,160,000 deduction limit is reduced by $60,000 ($2,950,000 - $2,890,000). The reduced limit of $1,100,000 ($1,160,000 - $60,000) is entered on Form 4562 in Part 1, line 5 (Dollar limitation for tax year).

If the cost of the property was $4,050,000 or more, no first-year expensing deduction would be allowed for 2023 because it would be completely phased out ($4,050,000 - $2,89,000) = $1,160,000.

2023 Bonus Depreciation (Section 168(k):

Bonus depreciation is an additional first-year depreciation allowance equal to a set percentage of the adjusted basis of eligible property. The percentage for bonus depreciation for 2023 is 80%. Bonus depreciation is fully deductible for alternative tax purposes; no adjustment is required. Bonus depreciation is also referred to as a "Section 168(k) allowance" and a "special depreciation allowance".

Bonus depreciation can be claimed for any property with a recovery period of 20 years or less, computer software that is not a Section 197 intangible, and buildings that replace or rehabilitate property damaged, destroyed, or condemned as a result of a federally declared disaster. Eligible property also includes the costs of television, film, and theatrical production and the cost of certain plants that are planted and grafted.

Keep in mind, if you fail to make an election not to claim bonus depreciation, then you are deemed to have claimed it even if you did not and must reduce the basis of the property by the amount of bonus depreciation that could have been claimed. You may elect out of the additional first-year depreciation (bonus depreciation) by attaching a statement to your return specifying the asset class which you do not want to claim bonus depreciation. For example, you can elect out of bonus depreciation for all five-year property while claiming it for seven-year property.

Report bonus depreciation in Form 4562, Part II labeled "Special Depreciation Allowance", unless the property is "listed property". For listed property, use Part V of Form 4562.

Tax Year: 2023

Reminder:

For 2023, only taxpayers who itemize deductions on Schedule A (Form 1040 or 1040-SR) may deduct charitable contributions. The rules that applied in 2021 under the Consolidated Appropriations Act of 2021 (CAA) expired. Under the CAA, taxpayers claiming the standard deduction on their 2021 tax return could deduct contributions up to $300 ($600 if married filing jointly) made in cash to qualified charities.

Tax Year: 2023

The child tax credit for 2023 is $2,000 per qualifying child under age 17 at the end of the year for those with modified adjusted gross income (MAGI) below certain limits. The credit begins to phase out when MAGI exceeds $400,000 if married filing jointly or $200,000 for all other filers. You must complete Schedule 8812 to determine the amount of the credit ($2,000 x number of qualifying children).

The tentative credit, figured on Schedule 8812, is compared with your tax liability (regular tax plus alternative minimum tax minus specified credits); the smaller amount is the allowable child tax credit. If your child tax credit is limited to your tax liability, part or all of the excess credit may be refundable as an additional credit (ACTC) if your earned income exceeds $2,500 or you have three or more children.

To claim the child tax credit or the additional child tax credit:

1. You (and your spouse if filing jointly) must have a valid Social Security Number (SSN) by the due date for filing your 2023 return (plus extensions).
2. If you are not eligible for a SSN, you must have an Individual Taxpayer Identification Number (ITIN) by the return due date (with extensions). If the SSN or ITIN was not issued by the due date (with extensions), you cannot claim the child tax credit or the ACTC on your original return or on an amended return if you get the number later.
3. Each qualifying child must have a SSN that is valid for employment issued before the due date of your return (with extensions). If the required SSN is not obtained by the due date (with estensions) you cannot claim the child tax credit or ACTC for that child, either on your original return or on an amended return if you get the number later. However, if a qualifying child does not have the required SSN by your filing due date, you may be able to treat that child as your dependent for purposes of claiming the credit for other dependents.

Dependent Care Credit and Exclusion:

For 2023, the child and dependent care credit is nonrefundable. In figuring the credit, you take qualifying expenses into account, $3,000 for one qualifying person and $6,000 for two or more qualifying persons. The credit ranges from 35% down to 20%, depending on adjusted gross income. The exclusion for dependent care under an employer's dependent care assistance plan is $5,000 ($2,500 if married filing seperately).

Tax Year: 2023

For 2023 the maximum EIC amount is $3,995 for one qualifying child, $6,604 for two qualifying children, $7,430 for three or more qualifying children, and $560 for taxpayers who have no qualifying child. The phaseout ranges for the EIC have been adjusted for inflation. The excessive investment income limit is $11,000.