“Nothing is certain except death and taxes.”
When Benjamin Franklin famously said this in 1789, he should have also included tax updates. Tax updates occur every year. They may consist of changes to tax laws, adjustments to tax brackets, updates to deductions and credits, and modifications to filing requirements. Being informed of these updates can save time and money.
Here are five important tax updates for 2023 for both businesses and individuals.
- Child Tax Credit
The enhanced child tax credit from 2021 is no more. Congress has not been able to agree on its permanency. Just like in 2022, the credit remains $2,000 per qualifying child. But for 2023, a maximum of $1,600 is refundable. The income phase-out rules for this credit start at $200,000. - Payroll Taxes
For 2023, the limit on wages subject to Social Security Tax increases to $160,200. All wages are subject to the 2.9% Medicare Tax, which didn’t change and has no ceiling. - AMT Increases
The alternative minimum tax (AMT) exemptions will increase for taxpayers in 2023. Single taxpayers are allowed up to $81,300 in taxable income, and jointly filing taxpayers are permitted up to $126,500 before the AMT needs to be considered. - Emergency Efficiency Improvements
Purchasing a new electric vehicle (EV) may qualify you for a $7,500 tax credit for cars assembled in North America. And buying a used EV could provide partial tax credits.There are price caps on the type of EV purchased, and income phase-outs for the EV tax credits start at $75,000.
Making energy-efficient improvements to your home can qualify for up to a $1,200 annual tax credit. Previously, there was a $500 lifetime tax credit per taxpayer. - Expense Deduction for Business
In 2023, businesses can deduct up to $1.16 million for assets purchased this year.
Bonus depreciation for 2023 will drop to an 80% immediate deduction, with the remaining 20% depreciated over the asset’s life.
The 100% expensing of business meals eaten in a restaurant that was in effect for 2021 and 2022 is gone. For 2023, business meals will be 50% deductible. Entertainment expenses remain non-deductible.
There are many other important tax updates for 2023. Let the tax professionals at Boris Benic and Associates help clarify which changes apply to you. We have a wealth of experience to help you avoid penalties and errors. Schedule a consultation today.