New Tax Rules for 2023

Before we get too far into 2023, we thought it would be beneficial to bring to everyone’s attention some of the significant tax changes that became effective for the tax year 2023. Keep these changes in mind as you proceed through the year will help you save tax dollars when it comes time to file your personal and business taxes.

Personal Standard Deduction for 2023 increases due to inflation:

  • Single $13,850

  • Married, filing jointly $27,700

  • Married, filing separately $13,850

  • Head of household $20,800

Energy Efficient Home Improvement Credit

Expanded credit beginning in 2023:

  • Credit increased from 10% to 30%

  • No longer required for primary residence.

  • $500 lifetime limit will be replaced by a $1,200 annual limit on the credit amount. Annual credit limit of $1,200 per taxpayer, per year with limitations by property type

  • After 2024, product must have an assigned identification number and the taxpayer.

  • claiming the credit includes the number on their 1040.

  • The revised credit is extended through 2032.

Excess Business Loss Limitation - Extended by law through 2028

  • 2023: Single $289,000; Married, filing jointly $578,000

  • Excess Amounts convert to net operating loss carryover (NOL)

  • NOL Carries forward indefinitely

  • May offset up 80% of taxable income

Bonus depreciation

Bonus depreciation on certain fixed assets purchased for a business is now on a 5-year phase-out starting 1/1/2023. Here are the phase-out dates.

  • 2023 80%

  • 2024 60%

  • 2025 40%

  • 2026 20%

  • 2027 0%

For a “C” Corporation business, charitable contributions are limited to 10% taxable income limitation (from 25% in 2021).

Business Meals – 2022 was last year for 100% deductibility (back to 50% in 2023).

The “small business” exception for various favorable tax rules such as interest expense limitation exemption, the cash method of accounting, 263A reseller exemption = $27 million average receipts (up from $26 million).

IRS business mileage rate increases from 62.5 cents (2022) to 65.5 cents (2023) per mile driven.

On certain fixed assets purchased for a business, the Section 179 expense property Limit is increased to $1,080,000.

This alert covers only some of the tax changes effective for the 2023 tax year that could benefit you, your family, and your business. Please get in touch with us if you have questions, want more information, or would like us to help design a 2023 tax year plan that delivers the best tax results. 

TaxArpita Joshi