The Latest Tax Code Updates You Need to Know About

Every year, the tax code is updated. And every year, business owners and individuals have to scramble to understand how those updates will affect them. This year is no different. So, what are the latest tax code updates and how can Kurv support your business with these changes? Here’s a quick overview of the tax code changes for the year 2023.

Tax Code Changes That Will Affect Your Business in 2023

The Internal Revenue Service (IRS) has announced the annual inflation adjustments for various tax-related provisions for the upcoming 2023 tax year. These updates are made to reflect cost-of-living increases that have occurred over the past year. Below are some of the key changes that taxpayers should be aware of.

Standard Deduction Amounts Increasing

For 2023, the standard deduction for married couples filing jointly will increase to $27,400, up from $26,100 in 2022. For single filers and married taxpayers filing separately, the deduction will increase to $13,700, up from $13,050 in 2022. And for heads of households, the deduction will increase to $20,850, up from $20,300 in 2022.

These increased amounts mean that fewer taxpayers will itemize their deductions on their federal tax return. According to the IRS, only about 10% of taxpayers are expected to itemize in 2023 compared to about 30% who itemized in 2020.

Personal Exemption Increase

The personal exemption for tax year 2023 will be $4,950, an increase of $50 from the exemption amount for tax year 2022. The American Taxpayer Relief Act had suspended personal exemptions for tax years 2018 through 2025. However, the new American Rescue Plan Act reinstated the personal exemption starting with tax year 2021. The act also increased the exemption amount for 2021 and 2022.

Alternative Minimum Tax Exemption

The Alternative Minimum Tax (AMT) exemption amounts for tax year 2023 will be:

  • Married couples filing jointly and surviving spouses—$109,400, up from $108,900 in 2022
  • Unmarried individuals—$54,700, up from $54,100 in 2022
  • Married individuals filing separately—$54,700, up from $54,450 in 2022

Estate and Gift Tax Exemption

The estate and gift tax exemption is scheduled to increase to $11.7 million per person in 2023 from $11.58 million per person in 2021 and 2022.

Increased Tax Brackets and Rates for Ordinary Income

The tax brackets and rates for ordinary income—such as wages and salaries—will also change for 2023. The top marginal rate will remain 37% for taxable incomes over $523,600 for singles and over $628,300 for married couples filing jointly. However, all other marginal rates will decrease by one percentage point from where they were in 2020. The new marginal rates will be: 10%, 12%, 22%, 24%, 32%, and 35%

Long-Term Capital Gains Rates Remaining Unchanged

The good news is that the 0% and 15% long-term capital gains rates that were enacted as part of the Tax Cuts and Jobs Act will remain unchanged for 2023. These rates apply to assets held for more than one year that are sold at a profit. So if you have investments such as stocks or mutual funds that you’ve been holding onto for a while, you’ll still benefit from these lower tax rates when you sell them.

Important Tax Code Updates for 2023

These are just some of the key changes that taxpayers need to be aware of for 2023. For a complete list of all the inflation adjustments announced by the IRS, visit their site here. As always, it’s a good idea to consult with a tax professional to make sure you’re taking advantage of all the deductions and credits you’re entitled to. For more information on how these updates may affect you specifically, feel free to contact your next tax advisor at Kurv Inc.