Personal Tax Tips

     Note:  Investment income must be $10,000 or less for the year.

  Maximum Credit Amounts for Tax Year 2023 are:    

• $7,430 with three or more qualifying children

• $6,604 with two qualifying children

• $3,995 with one qualifying child

• $600 with no qualifying children 

  For more information on whether a child qualifies you for EIC, see:

• Qualifying Child Rules, or

• Publication 596, Rules If You Have a Qualifying Child

As in 2022,  the Child Tax Credit is $2000 per child, birth to 16 years old.  If your child is 17 or older, the credit is $500, the same amount for other dependents such as a parent, etc.   If your tax liability is less than your qualified Child Tax Credit amount,  then you can qualify for an additional child tax credit which is refundable.

Remember: This child must have lived with you for over 1/2 year (there are a few exceptions, make sure to discuss with me) and you must have provided at least half of this child's support, i.e. roof, clothing, food, cell phone, car, whatever.  The child cannot be filing a joint return with a spouse (unless just filing to get a full refund of taxes paid).

This child tax credit ($2,000 per child under 17 yrs of age) phases out for married filing joint folks with over $400,000 in income, $200,000 if single/head of household.

Charitable Giving for 2023

 Just as in 2022, no more above-the-line deduction for charitable giving .  You have to be able to itemize.

NEW FOR 2023!!!

If you buy a new plug-in electric vehicle (EV) or fuel cell vehicle (FCV) in 2023 or before, you may qualify for a clean vehicle tax credit up to $7,500.  You must buy it for your own use (not for resale), and use it primarily in the USA.  Your income must be under $300,000 if married filing joint, $225,000 for head of households, and $150,000 for single folks.  You can use your AGI (adjusted gross income) from the year you take delivery of the vehicle or the year before, whichever is less.  This is a non-refundable credit, so you can't get back more on the credit than you owe in taxes.  .  You must buy the vehicle new (for the up to 7500 credit), and the MSRP can't exceed $80,000 for vans, or $55,000 for other vehicles. If you purchased a used vehicle, you may qualify for a credit up to $4000. 

If you bought your electric vehicle before 2023, you may be able to amend your return and take the credit.

For more info, please visit https://www.kiplinger.com/taxes/tax-law/603037/tax-changes-and-key-amounts.

I

Federal long-term capital gains rates

The chart below may help you if you are concerned about long term capital gains (investments held over 1 year).

The long-term capital gains rate is now based on your maximum taxable income levels.  

   Capital Gain Rate          Single                                Married Filing Joint

                    0                     0 - $44,625                                0 - $89,250

                  15%                $44,626-$492,300              $89,251-$553,850

                   20%               $492,300  or more              $553,850 or more

Source: Smart Asset 2024 Capital Gains Tax Rates.  Please see the source if you are married filing separate or head of household.  The rates above are for 2023.

Please note the following:

First, if your long-term capital gains take you into a higher tax bracket, only the gains above that threshold will be taxed at the higher rate. In other words, if your long-term capital gains bring your taxable income $1 over the level for the 0% bracket, only $1 will be taxed at 15%, and the rest of your long-term capital gains will be taxed at 0%.

Second, for single taxpayers who make more than $200,000 per year and married taxpayers who file jointly and earn more than $250,000, there is an additional 3.8% tax on investment income, including capital gains, above a certain level because of the net investment income tax.

DELINQUENT TAXPAYERS--THE IRS IS GETTING SERIOUS ABOUT YOU!!

According to an article by Michael Cohn in Accounting Today News, there has been a bill passed in Congress and signed by Obama in December 2015  that will allow the State Department to revoke the passports of long-term tax delinquents who owe the IRS over $50,000 in tax debts.  I know to most of us $50K is a lot of money, but this amount could be an accumulation of several years, so it really would not take many years to owe this kind of money.  Okay, you say," no problem, I don't travel overseas", BUT there is another sneaky provision...they are gonna hire PRIVATE TAX COLLECTORS!!  Be sure your tax returns are current.

 Note: Please be aware that criminals are posing as IRS agents trying to get you to pay PHONY tax debts.  DO NOT answer any questions to someone calling you.  The IRS ALWAYS writes, they do not call or email.  

However, now that this law has passed, I'm not sure what the protocol for the tax collectors will be.  IF YOU OWE THE IRS BACK TAXES OR HAVE NOT FILED, CONTACT ME SO WE CAN GET THIS TAKEN CARE OF!!!   I will be happy to advise you as to next steps and who to contact for help.

I can give you a copy of this entire article if you wish, or you can download it at http://www.accountingtoday.com/news/tax-practice/highway-bill-revoke-passports-tax-delinquents-private-debt-collectors-76612-1.html.  Be sure to note the "continue to site" click on top right of page so that you don't buy or get signed up for something you may not want.  Yes, they are calling this a HIGHWAY BILL!!!  

Alimony is now NOT deductible for payers, and NOT taxable to recipients, if your divorce ended after December 31, 2018.

 If your divorce ended before Dec 31, 2018, then the old rules generally apply unless modifications were made.

Other Miscellaneous Information:

Social Security wage base for 2023 is $160,200.  Under age 67 (if born after 1960), the amount you can make is $21,240 before you start to lose a portion of your social security benefits. However, if you are over age 67, you can earn any amount of money and still draw your full social security benefits.  

Regular IRA Contribution Limit for 2023 is $6,500.  If over 50, you can make an additional $1000 contribution.  However, 2023 contribution limits for 401K's have increased to $22,500.  If over age 50, you can make an additional $7500 contribution.  For Roth IRA's, the dollar limits are the same as regular IRA's.  Income limits apply to both IRA's and Roth IRA's.

Don't forget you have to take your RMD (required minimum distribution) from your retirement accounts before the year end, or you will face a 50 percent penalty.

Teachers get a 300$ deduction this year -up $50 from last year for classroom supplies purchased.

The Non-Business Energy Property Credit expired two years ago.  However, they have come up with a new one--The Energy Efficient Home Improvement Credit.   This new credit starting in the 2023 tax year is equal to 30 percent of the costs for all eligible home improvements made during the year, or the annual $1200 limit. Annual dollar credit limits apply to specific items including:  $150 for home energy audits; $250 for exterior door (500 for all exterior doors), $600 for exterior windows, skylights, central a/c, gas or propane water heaters, furnaces, etc.

The previous credit had a lifetime credit of $500.  This NEW credit can give you up to $1200 PER YEAR for 10 YEARS.  So you may want to spread out those improvements over 10 years instead of doing them all at once.  Solar, wind turbines, and battery storage technologies qualify for a separate credit. Roofing does not qualify except under certain conditions--example-solar roofing tiles.