What to know when filing taxes in 2023, Child Tax Credit, Social Security, Form 1099-K, Secure Act 2.0 and more

The start of each new year brings with it many changes, some of which can impact your wallet. Financial expert Justin Reppy of Goldstone Financial Group said there are several new currency rules that consumers should be aware of this year.

Child tax credit

• For the 2022 production season, the Child Tax Credit and Child and Dependent Tax Credits have both been reduced.
• The child tax credit has been reduced to $2,000 per child. The Child and Dependent Tax Credit is capped at $3,000 for one dependent or $6,000 for multiple dependants.

Charitable deductions

• Last year, charitable-minded taxpayers could claim a deduction of up to $300 in donations or $600 for those filing jointly.
• This year, this tax relief is no longer in place and you can only claim a deduction if your itemized deductions exceed the standard deduction.

Form 1099-K

• The IRS has pushed back its requirement for Form 1099-K until next year when you file your 2023 returns.
• Originally slated to go into effect this year, Form 1099-K is required if you run a side job and collect payments using Venmo, PayPal, or another similar app, and earn more than $600.
• Keep in mind that transactions such as paying a friend for dinner or sending money to a roommate for utilities are not eligible for this form. Only commercial transactions must be declared.

What other tax changes should you be aware of for 2023?

• While these tax changes won’t affect your 2022 tax returns, it’s important to be aware of the 2023 tax changes because they may affect your tax deductions, pension contributions, or other financial decisions throughout your life. of the year.
• The IRS adjusts the income tax brackets each year to keep pace with inflation, but due to abnormally high inflation, the adjustment for 2023 is larger.
• You can check your income bracket on irs.gov. If your tax bracket changes, be sure to adjust your withholding to avoid a big tax bill or refund in 2024.
• In 2023, the contribution limits for 401(k)s, 403(b)s, 457 plans and Thrift Savings Plans increased to $22,500. Catch-up contributions have increased to $7,500.
• You can contribute an additional $500 to your IRA in 2023, with a total maximum of $6,500.

What other new rules should you know about in 2023?

• Starting in 2023, Social Security benefits increase by 8.7% — the largest cost-of-living adjustment, or COLA, since 1982.
• On average, retirees will receive an additional $146 per month from Social Security, bringing the average benefit to $1,827.
• Many people receiving Social Security benefits get Medicare, and Medicare Part B premiums are going down in 2023.

• Be strategic about when you start taking Social Security, to maximize the amount of your benefits. We often help our clients make this important decision. You can learn more about our retirement planning process on our website, goldstonefinancialgroup.com.

The Secure Act 2.0 was recently enacted. What impact will this have on retirement savers?

• Dozens of retirement planning provisions, known as Secure Act 2.0, were included in recently passed legislation as part of the 2023 federal spending bill.
• New regulations have increased the start age for required minimum distributions or RMDs to 73 from 2023.
• Other changes include increased catch-up contributions, automatic enrollment in employer-sponsored retirement plans, and a retirement savings match for student loan repayments. These other benefits will only come into effect in 2024 or 2025.

Why is it important to ensure new financial rules?

• No one wants to be caught off guard. Keeping tabs on these changes can help you succeed financially, not just now, but in the future.
• Talk to a finance professional about how you can plan for any changes that may affect your plan.
• I see a lot of people with wallets hoping to make it through retirement. Hope is a horrible strategy. Our retirement roadmap offers a plan to help you retire with confidence.

SEE ALSO | New Laws in Illinois 2023: Complete List of Laws Effective January 1