Tax Planning Season – 5 Tax Changes for 2023 Tax Season
Even though tax filing season is still months away, this is a great time to start thinking about next year's tax return. If there is something that can reduce your 2022 tax bill, there is plenty of time to act before the year ends.
Proper tax planning requires an awareness of new tax laws and changes to existing ones.
If you would like a personal consultation for tax planning fr your taxes, please contact us to book an appointment.
Here are just 5 changes:
1. Business Meal Deduction
The pandemic-era tax law change allowed business meals to be 100% deducted. This deduction was temporarily increased from 50% to 100%. In 2023, the amount of the business meal deduction will be 80%
2. Mileage Rates
With the skyrocketing gas prices, the IRS adjusted the standard mileage rates for 2022 in the middle of the year.
The rates applicable during the year's first half are different than those used for the second half. The mileage rates are used to calculate tax deductions for the use of an automobile (i.e., a car, pickup truck, or van) for business purposes, medical-related travel, and moving expenses for active-duty members of the military.
From January 1 to June 30, the 2022 standard mileage rate for business driving is 58.5¢ per mile (56¢ per mile in 2021). The mileage allowance for medical travel and military moves for the same time span is 18¢ per mile (16¢ per mile in 2021).
From July 1 to December 31, the 2022 mileage rate for the use of an automobile for business purposes rises to 62.5¢ per mile. The standard rate for medical-related driving and military moving expenses jumps to 22¢ per mile for the second half of 2022.
3. 1099 K1 Forms
Starting with the 2022 tax year, third-party payment settlement networks (e.g., Zelle and Venmo) will send you a Form 1099-K if you are paid over $600 during the year for goods or services, regardless of the number of transactions.
Previously, the form was only sent if you received over $20,000 in gross payments and participated in more than 200 transactions. The gross amount of a payment does not include any adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts, or any other amounts.
This change to the reporting threshold means more people than ever will receieve receive a 1099-K form next year that they will use when filling out their income tax returns for the 2022 tax year.
1099-K reporting is only for money received for goods and services. It doesn't apply to payments from family and friends.
4. Charitable Gift Deduction
The up to $300 of charitable cash contributions ($600 for married couples filing a joint return) expired at the end of 2021. As a result, it isn't available for the 2022 tax year (it was available for 2020 and 2021).
Only people who claimed the standard deduction on their tax return (rather than claiming itemized deductions on Schedule A) were allowed to take this deduction.
The 2020 and 2021 suspension of the 60%-of-AGI limit on deductions for cash donations by people who itemize also expired, so the limit is back in place starting with the 2022 tax year.
5. Educator Expenses
For the 2022 tax year, teachers and other educators who purchase books, supplies, COVID-19 protective items, and other materials used in the classroom with their own money, can deduct up to $300 of these out-of-pocket expenses ($250 for 2021).
The maximum deduction for 2022 jumps to $600 for a married couple filing a joint return if both spouses are eligible educators – but not more than $300 each.
An "eligible educator" is anyone who is a kindergarten through 12th-grade teacher, instructor, counselor, principal, or aide in a school for at least 900 hours during a school year. Homeschooling parents can't take the deduction.
You do not need to itemize to claim it.
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