Rates are set by fiscal year, effective October 1 each year. Find current rates in the continental United States ("CONUS Rates").
| Taxable Income Threshold | 0% | 15% | 20% |
|---|---|---|---|
| Married Filing Jointly / Surviving Spouse | $1 - $89,250 | $89,251 - $553,850 | $553,851 and over |
| Head of Household | $1 - $59,750 | $59,751 - $523,050 | $523,501 and over |
| Single | $1 - $44,625 | $44,626 - $492,300 | $492,301 and over |
| Married Filing Separately | $1 - $44,625 | $44,626 - $276,900 | $276,901 and over |
| Collectibles gain | Maximum rate | 28% | |
| Unrecaptured Section 1250 gain on depreciated real estate | Maximum rate | 25% |
For 2023, you must itemize your deductions to claim charitable contributions. The tax benefit depends on your marginal tax bracket. For example, if you donate $1,000 and you're in the 24% tax bracket, it reduces your taxes by $200 if you itemize your deductions. A cash donation of any amount will be disallowed if it's not supported by a canceled check, account statement or written receipt from the charity. For donations of $250 or more, you must have a canceled check and written acknowledgement from the organization that indicates whether you received goods or services in return for your donation.
If you deduct a donation of property valued at more than $500, you must substantiate the contribution on Form 8283 and attach it to Form 1040 or Form 1040-SR. If the value you claimed for property exceeds $5,000, you generally must get a written appraisal.
If you donate a vehicle valued at over $500, you must attach Copy B of Form 1098-C to your return. Your deduction is generally limited to the gross sales proceeds received by the charity on sale of the vehicle, even if you could susbstantiate a higher fair market value.
The age cap on contributing to a traditional IRA has been repealed.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). You may make contributions to a traditional IRA for 2023 of up to $6,500, or $7,500 if you are age 50 or older at the end of 2023, provided that you have at least $6,500/$7,500 of earned income.
Educator expenses of up to $300 are deductible in 2023. This is claimed on Schedule 1, line 11 (Form 1040 or Form 1040-SR). Qualified costs include, books, classroom supplies, computer equipment and related software and services and other materials used in the classroom. Home schooling expenses do not qualify. If you're married and file jointly and each spouse is an educator, each spouse may claim up to $300.
This deduction applies to sole proprietors, those who have an interest in a partnership, LLC, or S corporation. Keep in mind, the deduction up to 20% of qualified business income is a personal deduction and not a business deduction. It can be claimed even if you don't itemize. The taxable income amounts used to calculate the QBID for 2023 have been adjusted for inflation.
For 2023, the adoption credit as well as the exclusion for employer-paid adoption assistance is limited to $15.950. The benefit phaseout range is modified adjusted gross income between $239,230 to $279,230.
For 2023, the maximum credit for a child under age 17 is $2,000. The credit begins to phase out when modified adjusted gross income exceeds $400,000 on a joint return or $200,000 for all other filers. There is an additional child tax credit that can be claimed if the child tax credit otherwise allowed is limited by tax liability; the refundable amount may not exceed $1,600 per qualifying child. The credit for other dependents is unchanged (i.e., not refundable and limited to $500 per dependent).
For 2023, the child and dependent care credit is nonrefundable. Qualifying expenses taken into account in figuring the credit are $3,000 for one qualifying individual and $6,000 for two or more qualifying individuals. 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 separately).
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.
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).
A high-deductible health plan is a prerequisite to funding an HSA. A high-deductible health care plan is a policy with a minimum deductible for 2023 of $1,500 for self-only coverage and a maximum out-of-pocket cap on co-payments and other amounts of $7,500. These limits are doubled for family coverage ($3,000/$15,000).
The contribution limit for 2022 is $3,650 for self-only coverage and $7,300 for family coverage. Those age 55 or older and not yet on Medicare can add an additional $1,000.
If you, or your spouse if filing jointly, made contributions to a retirement plan for 2023 you may be able to the "Saver's Credit". This includes contributions to a traditional IRA or Roth IRA made by April 15, 2024.
No credit is allowed if any of the following are true:
Note: Adjusted gross income is increased by any exclusion for foreign earned income or income from Puerto Rico or American Samoa, or the foreign housing exclusion or deduction:
The 2023 annual gift tax exclusion is $17,000 per donee for gifts of cash or present interests. The basic exemption amount for 2023 gift tax and estate tax purposes increases to $12,920,000. The top tax rate remains at 40%.
Note: A gift of present interest is one that the recipient is free to use, enjoy, and benefit from immediately without any strings attached. A future interest gift is where the recipient doesn't have complete use and enjoyment of it until some future time.
2023 AMT exemptions, exemption phaseout thresholds, and the dividing line between the 26% and 28% AMT brackets are adjusted for inflation. The 2023 AMT exemptions (prior to any phaseout) are $126,500 for married couples filing jointly and qualifying widows/widowers, $81,300 for single taxpayers and heads of households, and $63,250 for married persons filing separately. All nonrefundable personal credits may be claimed against the AMT as well as the regular tax.
The 2023 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 excessive investment income limit is $11,000. The phaseout ranges for the credit have been adjusted for inflation.