Davis Tax Services, LLP

Tax planning, preparation & problem resolution

A few highlights of tax provisions for 2023:

As for tax law changes, the year has been rather quiet at both federal and state levels. However, the Congress has passed a bill to extend a number of expired tax credits and tax breaks, notably expanded Child Tax Credit. The Senate still has to vote on the bill, so its future is uncertain. Stay tuned.
Standard deductions
Standard deductions and tax brackets rose with Cost of Living Adjustments (COLAs). Standard deductions are $13,850 for single filers, $20,800 for heads of household and $27,700 for married couples filing jointly.
Taxpayers age 65 or older get an additional $1,850 standard deduction, $1,500 each for married taxpayers.
Capital gains
Capital gains brackets also rose slightly. Capital gains are not taxable (0% rate) for individual taxpayers with taxable incomes up to $44,625, or $89,250 for joint returns.
Tax deduction for charitable contributions
There is no longer a federal deduction for charitable contributions if you don't itemize. However, Arizona has raised an additional deduction for nonitemizers to 31% of the donations.
And don't forget the dollar-for-dollar Arizona tax credit charities. For most, you can donate up to Apr. 15 and deduct on last year's return. Find out more at Arizona Tax Credits page.
Required minimum distributions
The age to start taking Required Minimum Distributions (RMD's) rose to age 73 in 2023 for those who haven't yet started taking RMD's. The table to calculate the distributions has been revised, lowering required amounts and allowing more money to stay in retirement plans.
The age limit for contributions is gone. If you are still working, you now may contribute to an IRA or 401(k) even if you are required to take RMD's.
Clean energy credits
Electric vehicle credits up to $7,500 were available for new EV's bought in 2023, and up to $4,000 for used EV's. However, the rules changed at several dates during the year, so eligibility depends on the date you got your EV.
The credit is up to $7,500 for new EV's and $4,000 for used EV's. Vehicles have to be built in the United States with largely American parts.
Home energy credits and solar equipment increased increased to 30% of cost. Also, the lifetime cap on residential energy credits has been replaced with a yearly limit of $1,200.
Student loan interest
Federal student loan borrowers who had to start making payments again in 2023 may deduct up to $2,500 of student loan interest.
The American Rescue Plan made forgiveness of student loan debt exempt from federal taxes through 2025. Arizona conforms to federal rules so foregiven loan amounts are exempt on Arizona returns but are taxable for some other states.
As Bitcoin and other "cryptocurrency" investing grows, IRS is looking to track it. If you had any cryptocurrency transactions, make sure you include those records with your tax documents.
Arizona implements flat tax
Arizona has changed from a "progressive" tax (where higher income people pay a higher tax rate) to a "flat" tax (where everybody pays the same tax rate). For 2023 and future years, Arizona has only one tax rates: 2.5%. For more details, see Arizona Tax News
Beneficial Owner Information Reporting
Small business owners have a new, non-tax reporting to be aware of starting in 2024. The Financial Crimes Enforcement Network (FinCEN) -- not IRS -- now requires registered businesses, such as corporations and LLC's, to file a statement of "Beneficial Ownership Information." The intent is to crack down on money laundering and asset hiding by "bad actors" (drug dealers, fraudsters and the like). New businesses have 90 days to file with FinCEN while existing companies have until the end of 2024. There is no fee for filing, but the penalties for not filing are harsh.