We are officially in the midst of the 2022 tax filing season. And yet, it’s not too early to talk about changes for the 2023 tax year. Planning ahead allows you to reap the full benefits and be prepared for the changes. Here are 2023 tax law changes (so far) for business owners and individuals:
Standard Deduction for 2023
- Married filing jointly: $27,700 (up from $25,900)
- Single: $13,850 (up from $12,950)
- Head of Household: $20,800 (up from $19,400)
IRA Contribution limit for 2023
The IRA contribution limit that can be deducted for 2023 is $6,500 (up from $6,000).
Mileage Rates for 2023
The 2023 mileage rate is 65.5 cents per mile for business purposes (up 3 cents); 22 cents per mile for medical purposes or moving expenses for qualified active-duty military members (no change); 14 cents per mile for charitable organization services (no change).
Per Diem Rates for Travel in 2023
When you’re traveling for business, you’re allowed to deduct the costs incurred both on travel days and days you’re there conducting actual business (in general, certain exceptions apply if you’re traveling internationally). But what if you’re super-savvy with your credit card points, and you’re able to get hotels for free, or you pay $10 per night to stay in a hostel? For food, what if you decide to eat street hot dogs each meal to save on cash? Do you miss out on being able to take those deductions because you’re traveling on a budget?
Nope! You can instead elect to take Per Diem rates for those expenses. That means even if you don’t incur any out-of-pocket costs, you still get to use these rates, and take that expense amount, as if you had actually paid for it. This works whether you incur no actual expenses, or if your actual expenses are less than the listed per diem rates.
Per diem rates are set yearly on Oct 1st by the government, and they vary by city, and list a per diem amount for lodging, for meals & incidentals. You can find listed per diem rates for domestic travel and international travel. Find per diem rates by location in the US on the GSA website.
The New Electric Vehicle Credit for 2023
Rules for the EV credit were updated as part of the Inflation Reduction Act of 2022 and allows up to a $7,500 credit for qualified plug-in EV’s or fuel cell electric vehicles (FCV). The amount you can claim is tricky as it depends on both your income and some details about the vehicle, like where it was built. On the positive side, you have the ability to choose which year you use your income for to qualify – you can either use the year you purchase the vehicle (eg 2023), or the the year before (eg 2022) to maximize your credit amount.
1099s for 2023
1099-K forms will be issued from third party payment processors (Venmo, etc.) for any single transaction exceeding $600. This change was originally planned for the 2022 tax year but postponed until 2023. Money received from friends/family for expense reimbursements or personal gifts is not taxable.
A note on 1099s your business must send: if you are proactive during the year with getting W-9s to your vendors to fill out, as well as keeping your bookkeeping up-to-date with accurate vendor information and payments, then issuing 1099s is a very simple process. If you haven’t done those things, January becomes much more stressful. Do your future-self a favor, and keep organized with your vendors and their payments.