As we approach half way through the year 2023, there are several updates to the tax code that taxpayers should be aware of. These updates will affect individuals, businesses, and tax professionals alike. Here are some of the key changes to keep in mind:
Individual Taxpayers
Standard Deduction
The standard deduction for individuals will increase to $12,900 for single filers and $25,800 for married couples filing jointly. This is a slight increase from the previous year.
Tax Brackets
Tax brackets will be adjusted for inflation, which means that taxpayers may see a slight increase in their taxable income before moving into a higher tax bracket.
Retirement Savings
The contribution limit for 401(k) plans will increase to $20,000, while the contribution limit for IRA accounts will remain at $6,000.
Business Taxpayers
Corporate Tax Rate
The corporate tax rate will remain at 21%, which was established by the Tax Cuts and Jobs Act of 2017.
Depreciation
Businesses will be able to deduct the full cost of qualifying property and equipment in the year it is placed in service, rather than depreciating it over several years.
Net Operating Losses
Net operating losses can now only be carried forward, rather than being carried back to previous tax years.
Tax Professionals & Tax Software
Tax professionals will need to update their tax software to reflect the changes in the tax code for 2023. This includes updating tax brackets, standard deductions, and other key provisions.
Continuing Education
Tax professionals will need to stay up-to-date on the latest changes to the tax code by completing continuing education courses and staying informed on IRS guidance.
