Tax Year 2023 Tax Guide and Tips
Tax season is officially here! The information in this article is for the 2023 tax year, which most taxpayers will file in 2024. We cover tax brackets, tips for filing, and a list of to-dos.
2023 Tax Brackets
The seven 2023 tax rates themselves didn't change (they are the same as those in effect for the 2022 tax year); however, the tax bracket ranges were modified based on inflation. Because of this, it's possible you could be in a different tax bracket for 2023 than the last time you reported your taxes, even if your income has not changed.1
Reminder: Tax Brackets Are Marginal
The IRS divides income into different tax rates. Each subsequent portion of your income will have an increased tax rate. For example, if you are a single filer who made $44,725 in 2023, your first $11,000 will be taxed at 10 percent. The next portion of your income will be taxed at an increased rate; from $11,001 to $44,725, your tax rate will be 12 percent.
As your income increases, you’ll fall into higher tax brackets and will have a higher tax rate for each portion of your income.
Why Would My Tax Bracket Be Different?
The IRS regularly adjusts tax brackets to take inflation into consideration. This is because, with inflation, people will face higher prices, meaning the purchasing power of their dollar is decreased. Knowing this, the IRS adjusts brackets in order to avoid bracket creep, a circumstance that occurs when inflation pushes your income into a higher tax bracket, or credits and deductions are reduced. In this scenario, an individual may not actually have increased purchasing power or greater disposable income, even with an increase in wages and salaries.
2023 Tax Brackets
Without further ado, here are the 2023 tax brackets according to your filing status and income from the IRS.1
10% Tax Rate
Single Individuals: from $0 to $11,000
Married Individuals Filing Jointly: from $0 to $22,000
Heads of Households: from $0 to $15,700
Married Individuals Filing Separately: from $0 to $11,000
12% Tax Rate
Single Individuals: from $11,001 to $44,725
Married Individuals Filing Jointly: from $22,001 to $89,450
Heads of Households: from $15,701 to $59,850
Married Individuals Filing Separately: from $11,001 to $44,725
22% Tax Rate
Single Individuals: from $44,726 to $95,375
Married Individuals Filing Jointly: from $89,451 to $190,750
Heads of Households: from $59,851 to $95,350
Married Individuals Filing Separately: from $44,726 to $95,375
24% Tax Rate
Single Individuals: from $95,376 to $182,100
Married Individuals Filing Jointly: from $190,751 to $364,200
Heads of Households: from $95,351 to $182,100
Married Individuals Filing Separately: from $95,376 to $182,100
32% Tax Rate
Single Individuals: from $182,101 to $231,250
Married Individuals Filing Jointly: from $364,201 to $462,500
Heads of Households: from $182,101 to $231,250
Married Individuals Filing Separately: from $182,101 to $231,250
35% Tax Rate
Single Individuals: $231,251 to $578,125
Married Individuals Filing Jointly: from $462,501 to $693,750
Heads of Households: from $231,251 to $578,100
Married Individuals Filing Separately: from $231,251 to $346,875
37% Tax Rate
Single Individuals: over $578,125
Married Individuals Filing Jointly: over $693,750
Heads of Households: over $578,100
Married Individuals Filing Separately: over $346,875
In addition to the tax inflation adjustments, the IRS also altered standard deductions. While the above rates and brackets are at the federal level, different states might have varying brackets and rates.
Tips for Filing 2023 Taxes
While doing your taxes always feels a bit tedious, these five tips can help you stay the course for filing your 2023 tax return.
Tip #1: Leverage Technology
If you are filing without the help of an accountant or advisor, you may find it beneficial to use tax preparation software. You can input the information, and the software can populate the numbers for you. Utilizing software can help you meet compliance requirements and help streamline the process, which in turn can potentially speed up the time it takes to receive your tax returns.
Tip #2: Accuracy Over Speed
Getting an early start on the filing process can allow you the time needed to go through your returns several times before mailing or e-filing. When you are claiming deductions, make sure you’re eligible under the current IRS rules, as some rules change year to year.
Have a paper trail ready and simply read from what you have in front of you. Take advantage of automated systems that can funnel reported income, interest or dividends directly into your tax preparation software. Guessing is fine if you want to estimate your refund amount, but not when you report to the IRS.
Tip #3: Report Everything
You may have made several charitable contributions last year or had several income streams. Perhaps you had a few investments that didn’t yield much. Whatever it may be, you should report all of this on your return.
When using tax software, it will recognize when you’ve given enough or earned enough to affect the amount of taxes you owe. Remember, it’s better to overreport than to leave things off your returns. The IRS is likely to discover how much you’ve earned or received via reporting requirements and will know if you haven’t reported income. If this is the case, then you may have to pay a little more next year.
Tip #4: Choose Between Standard Deduction & Itemizing
The IRS allows a standard deduction amount for those who wish to simplify filing. For the 2023 tax year, the standard deduction amount is $13,850 for single filers, $27,700 for married couples, and $20,800 for head of household.1 You can reduce the taxable amount on your return using the standard deduction. However, itemizing them may enable you to reduce your taxable amount even more. Some commonly used deductions include:
- State and local taxes
- Charitable contributions
- Casualty loss
- Business expenses for which you weren’t reimbursed
- Medical expenses
- Mortgage interest
If you’re already an itemizer, you should be sure to note how the most recent changes in the tax code may have (or may not have) affected certain deductions.
Tip #5: Understand Tax Credits
Tax credits act as reductions on the amount of tax owed. It’s important to note that they do not reduce your taxable income or change your tax bracket as a deduction might.
An example is the Earned Income Tax Credit, which helps low- to moderate-income workers and their families receive tax relief. If you qualify, you can use the credit to reduce the taxes you owe, which can potentially increase your return.2
If you have any questions this year, be sure to speak with a CPA or other trusted tax professional regarding your situation. An experienced professional can answer your questions and empower you to start the tax season off with confidence.
2023 Tax Filing To-Do List
Now that we know what are marginal tax bracket is and have some tips for filing, its time to prep. Whether you meet with a tax professional or prepare your taxes yourself, proper planning helps the processes go more smoothly and may reduce the risk of costly errors. The tips below can help to prepare to tackle this tax season with confidence.
To-Do #1: Gather All of Your Forms
Beginning in January, you’ll likely start to receive the forms you need to properly complete your tax return. If you are expecting a large refund, you will want to make a list so you don’t forget anything that could affect it. Once you receive your documents, first give them a scan to make sure they are correct and contact the sender if there are any discrepancies. Remember, even a simple misspelling can cause a flag on your tax return. Inspect all of your documents carefully.
Some of the forms you will need to look out for include the following:
- W-2s from your job
- SSA-1099 for Social Security benefits
- 1099s for additional income, interest, gains and losses
- 1095-A for government marketplace health coverage
- 1098s for reporting interest and tuition payments
- W-2Gs for any gambling winnings
- Schedule K-1s for company ownership
To-Do #2: Round Up Your Receipts
If you have your own business or plan to itemize your deductions, you will need to record expenses so that you can take advantage of any available write-offs. Gather all the receipts for business expenses, medical expenses, and other expenses that can be listed on your Schedule A or Schedule C. Receipts can be physical receipts or bank and credit card statements that show payments for these items. Once you’ve gathered them, organize them by type so that they are easy to find when you begin filing.
To-Do #3: Acquire Records of All Charitable Contributions
Throughout the year, you may have made donations to tax-exempt organizations. These donations can provide you with charitable contribution write-offs, which typically require itemized deductions and documentation. Most organizations, from churches to fundraisers, can provide a record of your tax-deductible contributions.
To-Do #4: Create a List of All Personal Information
While you likely know your Social Security number by heart, you will want to jot down the Social Security numbers of any dependents you wish to claim. This way, they are easy to access, and you can be sure they’re accurate. Also, make a list of addresses for any properties you own, as well as the dates on which they were bought or sold.
To-Do #5: Get a Copy of Last Year’s Tax Return
If you are using the same preparer as the previous year, they should have a copy of your tax return. If not, find your old copy and have it ready with your other tax items. Being able to reference your previous return can help you see what you filed last year, so you don’t overlook something this year.
To-Do #6: Determine How You Will Use Your Refund
If you expect to get a refund this year, you might want to take some time to consider what you plan to do with your return once you receive it. You have the option to apply your payment toward your tax bill next year if you believe you will owe. This can be a good idea for those who pay estimated taxes throughout the year, as it can often put a chunk toward your first installment.
Alternatively, you can choose to send the money directly to a checking or savings account or contribute it to an IRA, health savings account, or education account. If you plan to split the funds between accounts, you will need to complete Form 8888.
Wrap Up
There are always nuances when it comes to tax planning. Do I need to convert IRA to Roth before or after I retire? Where should I make my IRA contributions and how will it effect my income? How will my part income effect my social security, Medicare, or Pension?
Whatever the question, it is always best to contact your tax professional or financial advisor.
https://www.irs.gov/pub/irs-drop/rp-22-38.pdf
https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2023
https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit-eitc
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.