When can I file my 2023 income taxes with the IRS? What is the new standard deduction and child tax credit?

Trying to Plan Ahead

Dear Planning Ahead,

Full disclosure: I usually respond to questions from people on very tax topics. But you ask a lot of good and timely questions.

In fact, your letter is a mash-up of trending early January Google
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queries that were related to taxes.

These are valid questions from people who are trying to plan their financial lives for 2024, and this column is about providing answers.

First off, there’s no date announced yet for the start of the 2024 filing season, an IRS spokesperson said.

If history is any guide, it’s coming soon. Last year, the filing season kicked off on Jan. 23. In 2022, it was on Jan. 24. The 2021 start date was Feb. 12, a delayed start while the Internal Revenue Service caught its breath after a second round of stimulus checks.

The filing season marks the date when the IRS begins accepting and processing income-tax returns. April 15 is still Tax Day, meaning that’s the deadline to pay any tax owed. The IRS also accepts installment plans.

April 15 is also the deadline to either file a 2023 return or get an extension.

While we wait for the start date, there are things people can do. “Be prepared and be organized,” said Melanie Lauridsen, vice president of tax policy and advocacy at the American Institute of CPAs.

That includes gathering receipts for potential deductions, and keeping an eye for tax forms in the mail and via email, including W-2s from an employer. Here’s an IRS link to help you start planning for the upcoming filing season.

Prospect of a government shutdown

There’s a 2024 wrinkle: the chance of a federal government shutdown just as tax season comes into full swing.

Congress has a Jan. 19 deadline to hatch a funding deal and avoid a partial shutdown. While some agencies have money through Jan. 19, other agencies have funding through Feb. 2. That includes the IRS, Lauridsen said.

To be sure, an impasse wouldn’t sink filing season. “Taxpayers will be able to file their taxes in the event of a lapse,” Treasury Department spokesperson Ashley Schapitl said.

But Lauridsen is worried what the experience is going to be like if people and tax professionals have questions they can’t figure out on their own and need IRS staff assistance.

When lawmakers last flirted with a shutdown in the fall, the Treasury Department drew up contingency plans. The plans were built for a time when the IRS wasn’t in its filing season, she noted.

“During filing season, the IRS should be able to focus all its efforts on assisting taxpayers,” said Doreen Greenwald, national president of the National Treasury Employees Union, a union of federal workers at agencies including the IRS.

“NTEU urges Congress to move quickly to fully fund federal agencies for the remainder of the fiscal year and put to rest the threat of government shutdowns,” Greenwald said.

So stay tuned.

Income-tax brackets

The IRS unveiled income-tax brackets in fall 2022, which factored in four-decade high inflation that burned through 2022. The ranges jumped 7%, the largest year-over-year pop for the brackets in decades, according to one expert.

Check out this IRS link, beginning at page 6, for a breakdown on the tax brackets for tax year 2023.

Then there’s the tax year 2024 brackets, which the IRS announced in November. These brackets increased 5.4% year over year. We’ll file the tax returns using these brackets in early 2025.

Also remember that the tax brackets aren’t the final number on a household’s tax bill. Read on.

Standard deductions, 401(K)s and IRAs

The standard deduction for tax year 2023 is $13,850 for individuals. It’s $14,600 for 2024 returns, which will be filed early next year.

For married couples filing jointly, the amount is $27,700 in tax year 2023. It’s $29,200 in 2024 returns.

People can choose between itemized deductions and standard deduction, but IRS statistics show roughly 90% of taxpayers choose the standard deduction as the way they’ll shrink their taxable income.

As for your 401(k) contributions, the maximum amount you can tuck away is $23,000 this year, up from $22,500 the year before.

Retirement savers still have time to put more money into their IRAs. There’s an April 15 deadline for IRA contributions. If you’re age 49 and below, the maximum is $6,500. For people age 50 and above, the limit is $7,500.

The standard deduction, income-tax brackets and retirement-account contributions are indexed for inflation. That’s why they often rise from year to year, especially now.

Child tax credit

The child tax credit will remain the same. At least, as of now.

The child tax credit pays up to $2,000 for each qualifying child under age 17. Up to $1,600 of the payout is refundable for 2023 taxes. There are also 14 states that offer their own child tax credit, according to the National Conference of State Legislatures.

Capitol Hill lawmakers have pushed to expand the child tax credit. Democrats temporarily boosted the credit as high as $3,600 in 2021 and they have been pressing for a higher payout since it reverted to its $2,000 maximum.

One part of the potential deal-making focuses on an effort to return to more favorable deduction rules for businesses that have research and development costs. The other part of the deal pertains to an expansion of the child tax credit in some form or fashion.

“Discussions are ongoing and have been productive,” said Ryan Carey, a spokesman for Sen. Ron Wyden, a Democrat from Oregon who chairs the Senate Finance Committee.

“The goal is to have changes in effect for this upcoming tax filing season.”

Another reason to stay tuned as tax season approaches.

Got a tax question? Write to me at [email protected].

Thanks for reading. I want to help you think more broadly about the issues that affect your taxes. I’m not offering tax advice, just an attempt to look at what the swirl of tax rules and economic conditions could mean for your wallet.