If the idea of doing your taxes overwhelms you, you're not alone. According to a study from Stagwell, 57 percent of American adults say filing on their own is "nerve-wracking"—and 54 percent prefer to enlist help. People have these feelings because the tax system is notoriously complicated to figure out, and it doesn't help when the Internal Revenue Service (IRS) makes new changes every year. To make sure you get it right—regardless of whether you're brave enough to file on your own or you hire an accountant—you'll want to be aware of a few adjustments this tax season. Read on to find out which five major tax changes you need to know before filing your 2023 return.
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1 | Standard deductions increased.
Africa Studio / ShutterstockIn a Feb. 21 press release, the IRS issued an alert about changes to credits and deductions for tax year 2023, reminding taxpayers that the standard deduction amount increased for all filers in 2023.
If you're single or married filing separately, the new standard deduction is $13,850. If you're the head of household, the new standard deduction is $20,800, and if you're married filing jointly or a qualifying surviving spouse, the standard deduction is now $27,700.
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2 | Changes were made to child tax credits.
Rido / ShutterstockIn addition to an increase in standard deductions, there were changes to child tax credits. These allow taxpayers to claim a credit for each qualifying child and reduce tax liability.
Earlier changes made as part of the American Rescue Plan Act of 2021 have now expired. As a result, there's no longer an extra credit for younger children. The enhanced credit for qualifying children under six and children under 18 expired, and the base credit amount for each qualifying child is $2,000. The credit amount decreases or "phases out" when adjusted gross income is over $200,000 ($400,000 on a joint return), the IRS says.
There is also no longer an increased age allowance for qualifying children. To qualify, children must once again have been under age 17 at the end of 2023.
The IRS continues to monitor legislation that Congress could pass that would affect the child tax credit. In light of potential changes, the agency asks that those eligible for this credit not wait to file. If the legislation does pass, the IRS will automatically make adjustments to returns that they've received, meaning you won't need to do anything on your end after you file.
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3 | The additional child tax credit amount increased.
ArtistGNDphotography/iStockFor the 2023 tax year, the maximum additional child tax credit—the credit available when a taxpayer's child tax credit is more than their tax liability—has been increased to $1,600. Previously, the credit amount was up to $1,400 per child.
4 | The Earned Income Tax Credit (EITC) changed.
iStockThe American Rescue Plan Act also changed the Earned Income Tax Credit (EITC) rules for those without a qualifying child, opening the credit up to people between the ages of 19 and 24, and those older than 65. This tax year, however, those extended parameters are no longer in effect.
To claim the EITC without a qualifying child, taxpayers once again had to have been between 25 and 64 years old by the end of 2023. If married and filing jointly, one spouse must meet this age requirement.
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5 | There's a new clean vehicle credit.
Shutterstock / Virrage ImagesThe credit for new qualified plug-in electric drive motor vehicles also changed for 2023—and it's now known as the Clean Vehicle Credit. Changes were made to the maximum amount of credit as well as some of the requirements to claim the credit, the IRS says. The credit is reported through Form 8936 (Clean Vehicle Credits) and on Form 1040.
Best Life offers the most up-to-date financial information from top experts and the latest news and research, but our content is not meant to be a substitute for professional guidance. When it comes to the money you're spending, saving, or investing, always consult your financial advisor directly.
