New Tax Laws 2023: What to Know Before Filing in 2024

The information in this article is up to date for tax year 2023 (returns filed in 2024). 

2024 brings tax law changes to the Premium Tax Credit, Required Minimum Distributions (RMDs), and the introduction of new green energy tax credits. You may be able to claim the new tax credits if you’ve bought an electric vehicle or certain energy-efficient appliances for your home. 

It should be noted that these changes affect returns for tax year 2023 – the taxes you’ll file in 2024. Keep reading to learn more about these changes and how they will affect how you file in 2024! 

Income tax bracket adjustments 

Once again, tax brackets, eligibility thresholds for certain tax credits and deductions, and the standard deduction were increased to account for inflation.  

If you had an increase in income in 2023, you may have to pay more in taxes. But since the U.S. has a progressive tax system, it helps cushion you from having to pay more when you file. The system levies different tax rates on different portions of your income, so you usually won’t have to worry about paying more if you got a new job or raise within the year. 

Even if your income did bump you up into a new tax bracket, your tax rate will likely increase by just a few percentage points, depending on how large your pay raise was in 2023. See where your income falls – and view the latest income tax brackets

Standard deduction increase 

Just as the IRS adjusts tax brackets each year to keep up with inflation, the standard deduction works the same way. This year, the standard deduction has risen a bit for everyone.  

View the chart below to see how this year’s standard deduction stacks up against the 2022 amounts. 

Filing Status Tax Year 2023 Tax Year 2022 
Married Filing Jointly $27,700 $25,900 
Head of Household $20,800 $19,400 
Single  $13,850 $12,950 
Married Filing Separately $13,850 $12,950 

Further reading: What are Tax Credits and Deductions? 

 
Tax credit changes 

A tax credit is a dollar amount that can be subtracted from your tax bill after you’ve claimed your deductions. Think of it as a coupon code you enter at checkout when you buy something online.  

There are tons of tax credits available to claim depending on your filing status, dependents, financial situation, and more. Here’s what you need to know about popular and newly refreshed tax credits for tax year 2023. 

Earned Income Tax Credit (EITC) increases for 2024 

The EITC is one of the most popular tax credits designed to help low to middle-income households. The maximum credit amounts have increased. Check out the updated income thresholds below: 

Adjusted Gross Income (AGI) Limits 

Number of Dependents Single, Head of Household, or Widowed Filers Married Filing Jointly 
$17,640 $24,210 
$46,560 $53,120 
$52,918 $59,478 
3+ $56,838 $63,698 

Maximum EITC Amounts 

Number of Dependents Maximum Credit Amounts 
$600 
$3,995 
$6,604 
3+ $7,430 

New for 2024: Residential Clean Energy Credit and Energy Efficient Home Improvement Credit 

Tax year 2023 introduces some new tax credits that may encourage you to go green. For example, there’s the Residential Clean Energy Credit for new installations and upgrades to renewable energy systems, so think of appliances like: 

  • Solar water heating systems 
  • Solar electric systems 
  • Small wind energy systems 
  • And more! 

There’s another new tax credit for clean energy home installations called the Energy Efficient Home Improvement Credit available for up to 30% of the total costs paid for qualifying home improvements.  

Learn more: Green Energy Tax Credits for Home Improvements and Vehicles 

Clean Vehicle Tax Credit 

You can qualify for this tax credit if you’ve purchased a new or used electric or hybrid vehicle in 2023. You may be able claim up to $7,500 if you meet the income and vehicle requirements. Check out the full list of clean vehicle tax credit qualifications

Limit increases for retirement accounts 

Tax year 2023 introduces a few changes to RMDs, as well as increases to income and contribution limits for IRA and 401(k) retirement savings accounts. Let’s break down what these changes are and what they mean for your taxes.  
 

RMD updates for 2024 

A Required Minimum Distribution is an amount of money you must take out from an employer-sponsored retirement account or IRA once you reach retirement age. RMDs are in place to protect retirement-age taxpayers from paying taxes on their contributions since traditional IRAs and 401(k) accounts use pre-tax dollars.  

Starting in tax year 2023, the minimum age required to take your first RMD is now age 73. So, if you turned 72 in 2023, you would not need to take your first RMD until 2024. In addition to this requirement change, the minimum age to take distributions will now be age 75 for anyone born after 1960.  

Before tax year 2023, the minimum age to take distributions was 72. So, if you turned 72 in 2022, you should have taken your first distribution by April 15, 2023, and you must take your second RMD by December 31, 2023.   

If you are of retirement age with an employer-sponsored 401(k) or traditional IRA, and you forgot to take your RMDs, your contribution will be subject to a 25% excise tax (50% prior to tax year 2023). But there’s good news – this excise tax can be reduced to 10% if you take your RMD within two years of your deadline. Additionally, this penalty can be waived entirely if you can prove that your mistake was due to a reasonable error and you took steps to rectify the situation. 

401(k) and IRA contribution limits increase 

To keep up with inflation and the rising cost of living, 401(k) and IRA contribution limits have increased. If you have a 401(k) account, you can now contribute up to $22,500 in 2024 (up $2,500 from tax year 2022). You can also contribute an additional $7,500 if you’re over age 50 to catch up with your retirement goals. 

If you have a traditional or Roth IRA, you can now contribute $6,500 in 2024 (up from $500 from tax year 2022). If you’re over age 50, you can contribute an extra $1,000. 

New deduction limits for traditional IRA contributions 

You can take a deduction up to the limit ($6,500 or $7,500 for those over 50) if you or your spouse do not participate in an employer-sponsored retirement plan. If you do participate in an employer-sponsored plan, then the deduction phases out as your income increases. See the deduction limits based on your filing status and income below: 

Single: 

  • You can get a full deduction if your income is less than $73,000. You can take a partial deduction if your income is between $73,000 and $83,000. If your income is above $83,000, you’re not eligible to deduct your IRA contributions. 

Married filing jointly: 

  • You can get a full deduction if you and your spouse make less than $116,000. You’re eligible for a partial deduction if you make between $116,000 and $136,000. You cannot deduct your IRA contributions if your make more than $136,000.  

Let’s say that your spouse participates in an employer-sponsored retirement plan, but you don’t. Then, the deduction limits are a bit different:  

Married filing separately: 

  • You can get a partial deduction if you make less than $10,000. Unfortunately, if you make more than $10,000 a year, you cannot get this deduction. 

Married filing jointly: 

  • You can get a full deduction if you make less than $218,000, a partial deduction if you make between $218,000 and $228,000, and nothing if you make more than $228,000. 

New income limits for Roth IRAs 

Income limits also increased for tax year 2023. See the new income limits by filing status below: 

Single or head of household: 

  • You can contribute to the limit if you make less than $138,000, a reduced amount if you make between $138,000-$153,000 (up from $129,000-$144,000 in tax year 2022), and nothing if you make more than $153,000. 

Married filing separately: 

  • The new limits get complicated with this filing status. If you lived with your spouse for any amount of time in 2023 and you made more than $10,000 within the year, then you can’t contribute to a Roth IRA. But, if you didn’t live with your spouse at all in 2023, then you have the same contribution limits as Single or Head of Household taxpayers (see above).  

Married filing jointly: 

  • You can contribute to the limit if you make less than $218,000, a reduced amount if you make $218,000-$228,000 (up from $204,000-$214,000 in tax year 2022), and nothing if you make more than $228,000. 

Frequently asked questions about tax law changes 

Getting your mind wrapped around the latest tax updates can sometimes be overwhelming. Luckily, we’re here with answers to some of the most frequently asked questions about the tax law changes. 

What are the tax changes for tax year 2023? 

A majority of the changes have to do with adjustments for inflation and the introduction of new tax credits like the Residential Clean Energy Credit. We’ve broken down the specifics in this article. 

Will tax refunds be bigger in 2024? 

The amount of your refund depends on your individual financial situation and the tax breaks you claim when filing.  

When you file with TaxSlayer, we’ll identify all the credits and deductions you’re entitled to, so you can receive your maximum refund. Start now!  

When can I file my 2023 taxes? 

You can typically file your taxes once you receive your W-2 from your employer in late January. Get all the important deadlines for tax year 2023 here

How can I keep up with the latest tax law changes? 

As always, we’re here to keep you informed of the latest tax law updates. You can also visit the IRS website as the ultimate tax law authority. 

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