With pandemic-era stimulus checks and tax credits often in the rear view mirror in the 2023 tax season, certain things may have changed for some filers. Some are shifts based on inflation, such as a higher minimum tax exemption and slightly different tax brackets.
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Charles Schwab recently outlined several changes to tax laws for the 2023 tax season. You’ll want to keep these numbers in mind before you file your federal income taxes for 2022.
$12,950: The New Standard Deduction
Individual taxpayers (including married individuals filing separately) who choose not to itemize deductions can take a standard deduction of $12,950. This is an increase of $400 from $12,550 in 2021. Married couples filing jointly can now take a standard deduction of $29,500. Heads of household can take a deduction of $19,400.
$2,000: The Child Tax Credit for 2022
Parents and caretakers enjoyed a bump in their child tax credit (CTC), with half of the amount paid upfront, in 2021. For 2022 tax returns, the CTC returns to $2,000 per child aged 16 or younger. Parents can no longer claim the CTC for a child aged 17 and cannot claim a higher credit for children under 6. “The credit is also subject to a phase-out starting at $400,000 for joint filers and $200,000 for single filers. For other qualified dependents, you can claim a $500 credit,” per Charles Schwab.
$75,900: The AMT Exemption for 2022
The alternative minimum tax (AMT) was “designed to keep wealthy taxpayers from using loopholes to avoid paying taxes,” per Intuit TurboTax. The AMT exemption is the amount a taxpayer can deduct from their alternative minimum taxable income (AMTI), so that lower and middle-income taxpayers are not subject to AMT. The exception for the 2022 tax year is $75,900 for single filers or those filing head of household, $118,100 for married filing jointly or a surviving spouse, and $59,050 for taxpayers who are married, filing separately.
The AMT phases out at $1,079,800 for those who are married, filing jointly, and $539,900 for all other filers.
$12.06 million: Estate and Gift Tax Exemption
The estate and gift tax exemption is indexed for inflation. In 2022, it rose to $12.06 million. This is the amount of inheritance — in money, property or other assets — that can be distributed tax-free to your heirs. Estate taxes are paid upon your death for assets exceeding $12.06 million before your estate is distributed to heirs.
$16,000: Gift Tax Exclusion
The IRS allows people to gift friends and family with no tax liability on either side, exclusive of any estate taxes. In 2022, the annual gift exclusion rose to $16,000 per recipient, an increase of $1,000 from 2021, Charles Schwab reported.
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More: 9 Things Tax Filers Over 65 Need To Know in 2023
Tax Refunds Smaller This Year
Tax experts told NPR that refunds are likely to be smaller this year, especially with the elimination of the enhanced CTC and a few other tax breaks. It’s smart to consult with a tax professional to find legal, ethical ways to minimize your tax liability for 2022 and to plan ahead for taxes in 2023.
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This article originally appeared on GOBankingRates.com: 5 Important Numbers To Note Before Filing 2022 Taxes, According to Charles Schwab
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