What’s New for 2023 (filed in 2024)?
Federal healthcare penalty gone since 2019… but CA requires it, since 2020!
It is NO LONGER mandatory that all individuals have health care coverage or pay a penalty to the IRS. However, since 2020 state law requires California residents to maintain qualifying health insurance throughout the year. This requirement applies to each resident, their spouse or domestic partner, and their dependents. For those who do not have employer-sponsored coverage, insurance “exchanges” have been set up to facilitate shopping for insurance (for California it is www.coveredca.com). There is financial assistance available to ensure that individuals are not spending more than a certain percentage of their income on their health care premiums. Penalty calculator is available at ftb.ca.gov/healthmandate.
For more information about the new health care law, exemptions, and financial assistance available, go to CoveredCA.com.
Standard Deduction Increase
:: $13,850 for Single Filers
:: $27,700 for Married Filing Joint Filers
:: $20,800 for Head of Household Filers
Additional standard deduction of $1,850 for unmarried elderly or blind. Additional $1,500 per taxpayer for married elderly or blind.
Exemptions Still Suspended
Personal and dependent exemption deduction is increased for inflation, so for 2021 it is now at $4,300, however this has been suspended since 2018. For tax year 2021, it remains at zero.
Child Tax Credit & Credit for other dependents back to 2019 values
$2,000 tax credit per child under the age of 16. (Prior to 2018, was $1,000 per child). A credit of up to $500 is available for each of your qualifying dependents (17 and over). The total of both credits is subject to a phase out of $50 for each $1,000 over adjusted gross income of $200,000, or $400,000 if married filing jointly (Prior to 2018, was $110,000 for MFJ).
Child & Dependent Care Credit back to 2020 values
Eligible expenses are $3,000 for one child, $6,000 max. Credit is 20-35% depending on income. Dependent care flex spending was back to $5,000 for 2023.
Adjusted Tax Rates Remain
In 2018, most tax rates were reduced. This means most people paid less tax starting in 2018. The 2023 tax rates remain at 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
| 2023 Tax Brackets | ||||
| Tax Rate | Single | Married filing joint |
Married filing separate |
Head of household |
| 10% | $0 to $11,000. | $0 to $22,000. | $0 to $11,000. | $0 to $15,700. |
| 12% | $11,001 to $44,725. | $22,001 to $89,450. | $11,001 to $44,725. | $15,701 to $59,850. |
| 22% | $44,726 to $95,375. | $89,451 to $190,750. | $44,726 to $95,375. | $59,851 to $95,350. |
| 24% | $95,376 to $182,100. | $190,751 to $364,200. | $95,376 to $182,100. | $95,351 to $182,100. |
| 32% | $182,101 to $231,250. | $364,201 to $462,500. | $182,101 to $231,250. | $182,101 to $231,250. |
| 35% | $231,251 to $578,125. | $462,501 to $693,750. | $231,251 to $346,875. | $231,251 to $578,100. |
| 37% | $578,126 or more. | $693,751 or more. | $346,876 or more. | $578,101 or more. |
Threshold for medical and dental expenses made permanent
You can deduct certain unreimbursed medical expenses that exceed 7.5% of your 2023 adjusted gross income. Medical mileage rate for 2023 is $.22/mile. You can also deduct up to $5,430 in premiums paid for long term care insurance.
Deduction for state/local income, sales and property taxes modified
Since 2018, your total deduction for state and local income, sales and property taxes is limited to a combined, total deduction of $10,000 ($5,000 if Married Filing Separate). Any state and local taxes you paid above this amount cannot be deducted. CA allows full deduction for real and personal property taxes.
Deduction for home mortgage/home equity interest modified
Since 2018, your deduction for mortgage interest is limited to interest you paid on a loan secured by your main home or second home that you used to buy, build, or substantially improve your main home or second home. This just means interest on the same loan used to pay personal living expenses, such as credit card debts, is not. Just because you have a home equity line, does not mean its deductible… the funds must have been used to acquire or improve your home.
New dollar limit on total qualified residence loan balance.
Since 2018, the date you took out your mortgage or home equity loan may also impact the amount of interest you can deduct. If your loan was originated or treated as originating on or before Dec. 15, 2017, you may deduct interest on up to $1,000,000 ($500,000 if you are married filing separately) in qualifying debt. If your loan originated after that date, you may only deduct interest on up to $750,000 ($375,000 if you are married filing separately) in qualifying debt. The limits apply to the combined amount of loans used to buy, build or substantially improve the taxpayer’s main home and second home.
Miscellaneous itemized “employee expense” deductions suspended
The previous deduction for job-related expenses or other miscellaneous itemized deductions that exceeded 2 percent of your adjusted gross income is suspended from 2018-2025. This includes unreimbursed employee expenses such as uniforms, union dues and the deduction for business-related meals, entertainment and travel, as well as any deductions you may have previously been able to claim for tax preparation fees and investment expenses, including investment management fees, safe deposit box fees and investment expenses from pass-through entities. No longer deductible. We can however deduct such expenses on your California return, if the expenses exceed 2% of your income.
2023 Mileage Rates – increased
Business – 65.5 cents per mile
Medical/Moving – 22 cents per mile (since July 2022)
Charitable – 14 cents per mile (same)
2023 Retirement Contribution Limits
401(k), 403(b), 457 plan – $22,500 ($30,000 if 50+)
SEP IRA – 25% of net SE income after SE tax deduction up to a max of $66,000
SIMPLE IRA – $15,500 ($19,000 if 50+)
Traditional or Roth IRA – $6,500 ($7,500 if 50+)
(if taxpayer is not an active participant in an employer sponsored retirement plan)
Additional .9% Medicare Tax for wages in excess of:
Single, HOH, QW $200,000
Married Filing Joint $250,000
Married Filing Separate $125,000
3.8% Net Investment Income Tax on the lesser of:
(1) net investment income or
(2) excess of modified adjusted gross income over the threshold amount:
Single, HOH, QW $200,000
Married Filing Joint $250,000
Married Filing Separate $125,000
Earned Income Credit (Max)
No children $600, 1 child $3,995, 2 children $6,604, 3 or more children $7,430
Income must be less than:
3+ children: $56,838 for single workers and $63,398 for married workers.
2 children: $52,918 for single workers and $59,478 for married workers.
1 child: $46,560 for single workers and $53,120 for married workers.
No children: $17,640 for single workers and $24,210 for married workers.
Deduction for Qualified Businesses
Since 2018, taxpayers other than corporations may be entitled to a deduction of up to 20% of their qualified business income from a qualified trade or business under the Tax Cuts and Jobs Act. This deduction can be taken in addition to the standard or itemized deductions. The deduction is subject to multiple limitations based on the type of trade or business, the taxpayer’s taxable income, the amount of W-2 wages paid with respect to the qualified trade or business, and the unadjusted basis of qualified property held by the trade or business. There are income limitations.
Info is just for convenient reference, you should reference the IRS website for complete tax laws.