Good News for Taxpayers: Standard Deduction, Child Tax Credit, and Income Limits All Increasing in 2023
Hello my fellow taxpayers!
We are quickly approaching year's end, and it's time to prepare for tax season; I know I don't want to either. But the good news is some essential tax changes are coming in 2023 that you'll want to be aware of, and I'm here to break them down for you!
First off, the standard deduction is increasing. For those unfamiliar, the standard deduction is a set amount that you can deduct from your taxable income if you don't itemize your deductions. For the tax year 2023, the standard deduction will increase to $25,100 for single taxpayers and $32,600 for married taxpayers filing jointly. This is excellent news because it means that you may be able to claim a larger deduction and reduce your taxable income. Let me give you an example of what this looks like; my son, soon to be a college grad, will be entering the workforce. If he starts off making $100,000 a year, taking out his standard "single guy" tax deduction, his adjusted gross income would be $100,000 - $25,100 = $74,900.
Another exciting change is the increase in the child tax credit. For the tax year 2023, the child tax credit will be increased to $3,000 per child under 17. This means that if you have children and are eligible to claim the credit, you may be able to reduce your tax liability significantly. Taking the same example as above, let's say my son had three kids as well. After the standard deduction, he is at $74,900 in taxable income, and now, we take out $9,000 (3 kids x $3,000). His new taxable income would be $65,900. A significant difference from the $100,000 gross income!
In addition to increasing the amount of the credit, the income limits for the child tax credit are also rising for the tax year 2023.
Overall, these tax changes for 2023 are positive and should help to reduce the tax burden for many taxpayers, and let's be real, we all can use some positivity. Of course, it's a good idea to consult with a tax professional or refer to IRS guidelines to ensure that you take advantage of all available deductions and credits.
Happy tax planning!