Your Guide to Filing Taxes in 2023

This tax season, there are changes to tax laws that may impact your federal tax return. On March 11, 2021 the American Rescue Plan was signed into law to provide financial relief for millions of Americans. The plan included a third round of stimulus relief and expanded tax benefits that families could claim on their 2021 taxes (the taxes filed in 2022), however these tax benefits will either revert to what they were before the American Rescue Plan or expire.  In August 2022 President Biden also signed the Inflation Reduction Act of 2022 into law, with new tax provisions, extensions and expansions of tax benefits related to energy efficiency, healthcare, and corporate tax. Most of the provisions under the Inflation Reduction Act go into effect for tax year 2023, but there are some provisions that impact your tax year 2022 taxes.

We are here to break down the key tax law changes and what you need to know to help you understand the impacts to your taxes and guide you to filing your taxes this year. 

You also don’t need to remember all of this when you file your tax returns. If you have questions about anything below, you can connect live via one-way video with a TurboTax Live tax expert to get help along the way and have your taxes reviewed before you file. You can also just meet with a TurboTax Live Full Service tax expert who can prepare your taxes in one video meeting while they prepare your taxes.

First, let’s get some basics out of the way like when you can file your return, when is the filing deadline for your 2022 tax return, and what the standard deduction is for this year. Once we have those out of the way, we can dig into some of the topics related to the events that occurred in 2022 and the tax implications like deductions for charitable contributions, medical expenses, and changes to some credits.

When can I file my 2022 tax return? (the taxes you file in 2023)

TurboTax is open and ready to help you prepare your tax return. IRS e-file opened on January 23rd, so you can start filing today! 

When is the deadline for filing my 2022 tax return? 

The deadline for filing your 2022 is midnight on April 18, 2023, unless you file for an extension. Federal income taxes are due on Tuesday, April 18, 2023, because April 15 falls on the weekend and the Emancipation Day holiday in Washington, D.C. falls on Monday April 17. People who live in areas that were affected by natural disasters may also have later deadlines. For example, the due date for federal income tax returns is May 15 for residents of certain areas in California, Georgia, and Alabama that were affected by the recent storms.

*For tax year 2022, Emancipation Day falls on Monday, so the tax day gets pushed due to the holiday to Tuesday, April 18th. 

What is the standard deduction for 2022 tax returns? 

The standard deduction is adjusted for inflation and for single taxpayers (and married individuals filing separately), increased $400 from the previous year and rose to $12,950 ($25,900 for those married filing jointly). While for heads of households, the standard deduction will be $19,400, up $600. 

What are the tax implications of some 2022 tax law changes?

For tax year 2022 key tax benefits are changing or reverting to Pre-American Rescue Plan tax rules. Because some of these tax benefits are either reverting or going away some may see lower tax refunds than they saw in tax year 2021 if they were eligible for some of the credits under the American Rescue Plan. Below we will cover what the changes may mean for you and your tax return. 

American Rescue Plan Provisions

Child Tax Credit 

For tax year 2021 taxes only (the ones filed in 2022), the age limit and the amount of the Child Tax Credit (CTC) increased and it was fully refundable – meaning you were  eligible for the benefits even if you didn’t owe taxes. 

For tax year 2022, the Child Tax Credit reverts to the benefits available prior to the American Rescue Plan as follows:

• Credit is up to $2,000 
• Each dependent child must be under age 17
• No longer fully refundable but is refundable up to $1,400 
• There were no advance payments issued for tax year 2022 
• The credit is available if you earn up to $200,000 as single taxpayer or head of household (or up to $400,000 if you are a married couple filing jointly)

 Earned Income Tax Credit 

Under the American Rescue Plan, the Earned Income Tax Credit was expanded to workers without kids and nearly tripled the maximum credit. Also, eligibility was expanded to include taxpayers between age 19 – 25 and who are over age 65. For tax year 2022, this tax credit is worth up to $6,935. Taxpayers with no kids have to be 25 or under 65 to claim the credit and previous year income cannot be used to help you qualify for Earned Income Tax Credit.

Child and Dependent Care Credit

The American Rescue Plan also made changes to the Child and Dependent Care Credit for tax year 2021 only. If you sent your kids under 13 (no age limit if disabled) to daycare, aftercare, summer camp, or even sport camps so you can work, you were able to claim an increased credit of up to $8,000 for 2 or more kids in tax year 2021 only. For tax year 2022, the Child and Dependent Care Credit reverts to the pre-2021 provision and changes back to:

• Up to 35% of $3,000 ($1,050) of child care expenses for a dependent child under 13, an incapacitated spouse or parent, or another dependent so that you can work or look for work. If you have two or more dependents, the credit will be up to 35% of $6,000 in expenses ($2,100).
• The credit will be reduced at incomes over $15,000

Recovery Rebate Credit

If you were eligible for the third stimulus up to $1,400 for you or your dependent child(including adult dependents) and you didn’t receive your stimulus payment, you were able to claim the Recovery Rebate Credit on your 2021 taxes, but the Recovery Rebate Credit will not be available on your 2022 taxes.

Tax Credits for Sick Leave and Family Leave

The American Rescue Plan extended refundable tax credits for sick leave and family leave through tax year 2021 for both eligible self-employed and small business owners, but the credit expires after tax year 2021.

Charitable Deductions 

For the close to 90% of taxpayers who claim the standard deduction, you can no longer claim the deduction for cash donations up to $300 ($600 married filing jointly) if you claim the standard deduction. If you can itemize your deductions, you will still be able to claim your charitable deductions.

Medical Expenses and Health Insurance Deductions 

This year you, your spouse, or dependents may have spent some time in the hospital or paying some substantial medical bills. You may find some relief in knowing that you can deduct medical expenses more than 7.5% of your adjusted gross income if you are able to itemize your deductions. 

The IRS announced that personal protective equipment (PPE) can be claimed as a medical expense deduction if it was purchased with the primary purpose to prevent the spread of coronavirus. PPE includes items such as masks, hand sanitizer, and sanitizing wipes.

Don’t worry about figuring out that math. When you file with TurboTax you will be asked simple questions to see if you qualify based on your entries. Also, be sure to pull together the receipts from medical bills for you and your spouse or dependents.

If you were self-employed, you may be eligible to take a deduction for self-employed health insurance deduction on your 2022 tax return. This includes premium costs to cover you and your spouse and your dependents. 

Unemployment Benefits 

If you received help from unemployment insurance, you will need to pay taxes on payments received from unemployment benefits. You should receive a 1099-G reporting unemployment benefits received. 

Business and at Home Deductions 

If you’re self-employed, there are plenty of deductions that you can claim, from your business travel mileage to the portion of your home dedicated to your home office. TurboTax Self-Employed will guide you and search industry-specific deductions to make sure you don’t miss business deductions related to your self-employed income. 

If you are one of the many Americans with an employer who has been working from home, you won’t be able to claim a deduction for your home expenses. Unfortunately, this deduction is for self-employed workers only. 

Inflation Reduction Act

The Inflation Reduction Act was signed into law in August 2022, with new tax provisions, extensions and expansions of tax benefits related to energy efficiency, healthcare, and corporate tax.  Most of the provisions under the Inflation Reduction Act go into effect for tax year 2023, but there are some provisions that impact your tax year 2022 taxes.

The solar energy credit increased to 30% if you purchased residential energy efficient property like solar panels and solar water heaters between January 1, 2022 through December 31, 2032.

If you purchased an electric vehicle most of the changes under the Inflation Reduction Act are effective with electric vehicles purchased starting January 1, 2023. The only change in the law that is effective immediately starting on August 17, 2022 is that new electric vehicles must receive final assembly in North America. People who entered a binding contract to purchase a new electric vehicle before the Inflation Reduction Act passed can follow the previous rules in place.

What tax forms and documents should I gather?

If 2022 was the first year that you worked a side gig, received unemployment benefits, or traded stock you may get more tax forms than you have before. 

Here are some common tax forms where your income will be reported and you can expect to receive if any of these scenarios apply to you: 

• 1099-G: If you received unemployment benefits. 
• 1099-DIV/1099-INT: If you were paid dividends or earned interest over $10. 
• 1099-NEC: This is a new form where self-employment income or nonemployee compensation is reported.
• 1099-MISC: If you earned rental or other income, but self-employment income is no longer reported on this form.
• 1099-K*: If you earned income from credit card payments, debit cards, or pre-paid cards via side gig, for example, and had over $20,000 in sales and more than 200 individual transactions through a third party processor. 
• 1099-SA: If you got health savings account distributions. 
• 1099-R: If you received distributions from a retirement plan or IRA. 
• 1099-B: If you sold stock 
• W-2: If you earned wages from an employer. 

*Note, the IRS announced a delay in reporting thresholds for third-party settlement organizations set to take effect for the upcoming tax filing season. As a result of this delay, TPSOs will not be required to report tax year 2023 transactions on a Form 1099-K to the IRS or the payee for the lower, $600 threshold amount enacted as part of the American Rescue Plan of 2021. Well known third-party settlement organizations (TPSOs) include Venmo, PayPal and CashApp.

Per the IRS, this means that for tax year 2023 the existing 1099-K reporting threshold of over $20,000 in payments from over 200 transactions will remain in effect.

Don’t worry about knowing these tax laws. TurboTax will ask you simple questions about you and give you the tax deductions and credits you’re eligible for based on your answers. Meet with a TurboTax Live Full Service tax expert who can prepare, sign and file your taxes, so you can be 100% confident your taxes are done right. Start TurboTax Live Full Service today, in English or Spanish, and get your taxes done and off your mind.