Thursday, February 29, 2024

Optima Tax Relief Lists Tax Changes to Know Before Filing in 2024

Optima Tax Relief Lists Tax Changes to Know Before Filing in 2024
Photo Credit: Optima Tax Relief

Taxpayers are gearing up for the upcoming tax season with an eye on changes that may impact their financial landscape. Optima Tax Relief highlights key updates and adjustments that taxpayers should be aware of as they prepare for their 2023 taxes. 

Income Tax Bracket Adjustments 

Taxpayers can expect adjustments to income tax brackets. These changes reflect inflation and aim to prevent individuals from being pushed into higher tax brackets solely due to rising wages. Understanding these adjustments is crucial for accurate tax planning. 

Married Couples filing jointly will see the following tax brackets for 2023:

10% tax rate on taxable income of $22,000 or less
$2,200 plus 12% of taxable income between $22,001 and $89,450
$10,294 plus 22% of taxable income between $89,451 and $190,750
$32,580 plus 24% of taxable income between $190,751 and $364,200
$74,208 plus 24% of taxable income between $364,201 and $462,500
$105,664 plus 32% of taxable income between $462,501 and $693,750
$186,602 plus 37% of taxable income over $693,750

Single Filers will see the following tax brackets for 2023: 

10% tax rate on taxable income of $11,000 or less
$1,100 plus 12% of taxable income between $11,001 and $44,725
$5,147 plus 22% of taxable income between $44,726 and $95,375
$16,290 plus 24% of taxable income between $95,376 and $182,100
$37,104 plus 24% of taxable income between $182,101 and $231,250
$52,832 plus 32% of taxable income between $231,251 and $578,125
$186,602 plus 37% of taxable income over $578,125

Standard Deduction Increases 

The standard deduction, a key element in determining taxable income, increased for the 2023 tax year. Taxpayers may benefit from a higher standard deduction amount, potentially reducing their taxable income and overall tax liability. The standard deductions for 2023 are: 

  • $13,850 for single filers or married couples filing separately
  • $27,700 for married couples filing jointly or qualifying widow(er)s
  • $20,800 for heads of household

1099-K Reporting Delay 

A 1099-K is a tax form to report income received by a taxpayer who has received payments through certain payment settlement entities, like Venmo or PayPal. The IRS requires the issuance of a 1099-K if a taxpayer’s gross payments exceed a certain threshold. While the new threshold of $600 was supposed to begin in the 2023 tax year, the IRS has delayed this initiative. That said, if you earned $20,000 in gross payments over at least 200 transactions, you would receive a 1099-K by January 31, 2024. For tax year 2024, the threshold is shrinking to $5,000 in gross payments. Tax year 2025 will mark the official start of the severely reduced $600 threshold. 

Energy Tax Credits 

Taxpayers may be eligible for energy tax credits, especially if they purchased an electrical vehicle or made energy improvements to their home in 2023. These credits are designed to incentivize investments in energy-efficient technologies and renewable energy systems. Understanding the eligibility criteria and applicable credits can contribute to tax savings. The EV Tax Credit alone is worth up to $7,500 for new EVs and up to $4,000 for used EVs.  

Conclusion 

Navigating the complexities of tax regulations requires a thorough understanding of the latest changes. The outlined modifications for the 2023 tax year, from adjustments in standard deductions and income tax brackets to changes in retirement contributions, education-related credits, energy tax credits, and other areas necessitate careful consideration. Taxpayers are encouraged to consult with financial advisors or tax professionals to ensure a comprehensive approach to tax planning and compliance in the upcoming tax season. 

Published by: Aly Cinco

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