United States Tax Change Highlights for 2023
Due date of federal return extended if you live in Maine or Massachusetts, Form 1099-K $600 reporting threshold delayed, 2023 tax bracket inflation adjustments, new clean vehicle credit, IRS testing free Direct File program.
Due Date of Return
File your 2023 Form 1040 or 1040-SR by April 15, 2024. If you live in Maine or Massachusetts, you have until April 17, 2024, because of the Patriots' Day and
Emancipation Day holidays.
Who Must File
The amount of income you can receive before you must file a return has increased. See the tables in Publication 17 for more information.
Form 1099-K $600 Reporting Threshold Delayed
The $600 threshold for payment apps and online marketplaces to report payments on Form 1099-K is delayed for tax year 2023. The IRS is planning a threshold of $5,000 for tax year 2024. Details can be found in the IRS Newsroom. If you receive a Form 1099-K for 2023, find out what to do with it here.
2023 Inflation Adjustments
The IRS adjusts certain amounts to inflation each year, and the 2023 amounts went up significantly. It's possible that more of your income will fall into a lower tax bracket for 2023, meaning a bigger refund or less tax owing.
Standard Deduction Amount Increased
For 2023, the standard deduction amounts have increased for all filers. The new amounts are:
- Single or Married Filing Separately: $13,850
- Married Filing Jointly or Qualifying Surviving Spouse: $27,700
- Head of Household: $20,800
Alternative Minimum Tax (AMT) Exemption Amount Increased
The AMT exemption amount is increased to $81,300 ($126,500 if married filing jointly or qualifying surviving spouse; $63,250 if married filing separately). The income levels at which the AMT exemption begins to phase out have increased to $578,150 ($1,156,300 if married filing jointly or qualifying surviving spouse).
Additonal Child Tax Credit Amount Increased
The maximum additional child tax credit amount has increased to $1,600 for each qualifying child.
Delayed Refund for Returns Claiming the Additional Child Tax Credit (ACTC)
The IRS cannot issue refunds before mid-February 2024 for returns that claim an ACTC. This delay applies to your entire refund, not just the ACTC portion.
Credits for Qualified Sick and Family Leave Wages
The credits for qualified sick and family leave wages paid in 2023 for leave taken before April 1, 2021, and for leave taken after March 31, 2021, and before October 1, 2021, are now reported on Schedule 3, line 13z. See the instructions for Schedule H (Form 1040) for more information.
Clean Vehicle Credits
The credit for new qualified plug-in electric motor vehicles is now known as the clean vehicle credit. The maximum amount of the credit is still $7,500, but some of the requirements to claim the credit have changed. There is also a previously owned clean vehicle credit available for used vehicles acquired and placed in service after 2022. See the instructions for Form 8936 for more information.
Expiration of Temporary 100% Business Meal Deduction
Section 210 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 provided for the temporary allowance of a 100% business meal deduction for food or beverages provided by a restaurant and paid or incurred after December 31, 2020, and before January 1, 2023.
Standard Mileage Rate
The 2023 rate for business use of a vehicle is 65.5 cents a mile. The 2023 rate for use of your vehicle to do volunteer work for certain charitable organizations is 14 cents a mile. The 2023 rate for operating expenses for a car when you use it for medical reasons is 22 cents a mile.
Modified Adjusted Gross Income (AGI) Limit for Traditional IRA Contributions
For 2023, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is:
- More than $116,000 but less than $136,000 for a married couple filing a joint return or a qualifying surviving spouse,
- More than $73,000 but less than $83,000 for a single individual or head of household, or
- Less than $10,000 for a married individual filing a separate return.
If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work but you aren't, your deduction is phased out if your modified AGI is more than $218,000 but less than $228,000. If your modified AGI is $228,000 or more, you can't take a deduction for contributions to a traditional IRA. See How Much Can You Deduct in Chapter 9 of Publication 17.
Modified AGI Limit for Roth IRA Contributions
For 2023, your Roth IRA contribution limit is reduced (phased out) in the following situations.
- Your filing status is married filing jointly or qualifying surviving spouse and your modified AGI is at least $218,000. You can't make a Roth IRA contribution if your modified AGI is $228,000 or more.
- Your filing status is single, head of household, or married filing separately and you didn't live with your spouse at any time in 2023 and your modified AGI is at least $138,000. You can't make a Roth IRA contribution if your modified AGI is $153,000 or more.
- Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than zero. You can't make a Roth IRA contribution if your modified AGI is $10,000 or more.
See Can You Contribute to a Roth IRA in Chapter 9 of Publication 17.
Qualified Charitable Distribution One-time Election
Beginning in 2023, you can elect to make a one-time distribution up to $50,000 from an individual retirement account to charities through a charitable remainder unitrust, or a charitable gift annuity funded only by qualified distributions. See Publication 590-B for more information.
Increase in Required Minimum Distribution Age
If you reach age 72 in 2023, the required beginning date for your first required minimum distribution is April 1, 2025. See Publication 590-B for more information.
IRA Contribution Limit Increased
Beginning in 2023, the IRA contribution limit is increased to $6,500 ($7,500 for individuals age 50 or older) from $6,000 ($7,000 for individuals age 50 or older).
Disaster Tax Relief
The special rules that provide for tax-favored withdrawals and repayments now apply to disasters that occur on or after January 26, 2021. See Disaster-Related Relief in Publication 590-B for more information.
Distributions to Terminally Ill Individuals
The exception to the 10% additional tax for early distributions is expanded to apply to distributions made after December 29, 2022, to an individual who has been certified by a physician as having a terminal illness. See Publication 590-B for more information.
Certain Corrective Distributions Not Subject to 10% Early Distribution Tax
Beginning with distributions made on December 29, 2022, and after, the 10% additional tax on early distributions will not apply to the income attributed to a corrective IRA distribution, as long as the corrective distribution is made on or before the due date (including extensions) of the income tax return.
2024 Modified AGI Limits
You can find information about the 2024 contribution and modified AGI limits in Publication 590-A.
Deferred Compensation Contribution Limit Increased
If you participate in a 401(k) plan, 403(b) plan, or the federal government's Thrift Savings Plan, the total annual amount you can contribute is increased to $22,500 ($30,000 if age 50 or older) for 2023. This also applies to most 457 plans.
Health Flexible Spending Arrangements (FSAs) under Cafeteria Plans
For tax years beginning in 2023, the dollar limitation under section 1251(i) on voluntary employee salary reductions for contributions to health FSAs is $3,050.
Tax Law Changes for 2024 Payments
When you figure out how much income tax you want withheld from your pay during 2024, or how much you should pay for estimated tax, consider tax law changes effective in 2024. See Publication 505 for more information.
Direct File
The IRS is testing a Direct File pilot program during the 2024 filing season, which will give eligible taxpayers an option to prepare and electronically file their 2023 federal tax returns directly with the IRS for free. The Direct File pilot will be offered only to taxpayers in participating states who have relatively simple tax returns, report only certain types of income, and claim limited credits and deductions. See IRS.gov/DirectFile for more information and updates.