 Internal Revenue Service IRS tax news. IRS provides tax inflation adjustments for tax year 2023. Honestly, it's nice that the government finally actually recognizes the inflation issue at least. Yeah, are these inflation adjustments transitory? IRS? Just kidding. The administration would like to clarify their use of the term transitory as it relates to inflation. Transitory does not, and like totally never has, as some pundits stupidly think, mean that the problem of inflation will be temporary or short-lived. Quite the opposite. Transitory actually means, and totally always has meant, mind you, that we, the government, have performed the vital procedure to the body of the American economy of top surgery. You might ask, but why would you cut off the healthy, life-preserving breasts of the economy? And to that we say... Back off, man. I'm a scientist. As President Biden gets older, more and more of his day is just spent lying around. I love soup. I mean, I think I love soup, so I'll have a bitchin' share of either soup or duck. Which one do you shoot? Duck, sir. Are you alright, sir? Of course I'm alright. Why? What have you heard? I mean, in the evening, he lies in bed earlier and earlier. What, sir, we didn't happen with the other night? Really? Well, the hell was I? Who's this Cheryl? Huh, doesn't matter. In the afternoon, he gets up from lying in bed later and later. It's the final orders. We strike tomorrow at 0600. Excellent. Wake me up at 0530. Then walks to the podium to address the American people. Slend me your ears. That's disgusting. Where? He just continues to lie. Many of you are wondering what's wrong with my pants. Well, they started running short of material right before they got to the knees, so don't give me any shit. Now. When done lying at the podium, he lies back down for a nap. My ear canal's very sensitive. We have these to hold down the sound, sir. Oh, good. Thanks. That's all they do trick. Where he dreams of lying. The morale in this base is shot to hell. Just look out there. Quiet. Oh, they're not moving. Roy. Roy! I ain't went to school with that man. He's just not the same. He's been ignoring me all day. We are 2022-182 October 18, 2022 Washington. The internal revenue service today announced the tax year 2023 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes. Revenue procedure 2022-38. There's a link to that here provides details about these annual adjustments new for 2023. The inflation reduction act extended certain energy related tax breaks and indexed for inflation. The energy efficient commercial building deduction beginning with tax year 2023. That's all well and good. We can debate whether or not that be a good or bad idea from a legislative standpoint. However, does that have anything to do with reducing the inflation? I mean, it's almost as though they have their own goals. They fed off the fear of the American people with regards to inflation, the decreasing value of their dollars not going as far as they used to and lied about the bill. I mean, that's kind of what it looks like, but whatever. For tax year 2023, the applicable dollar value used to determine the maximum allowance of the deduction is 54 cents increased, but not above $1.07 by 0.02 or 2 cents for each percentage point by which the total annual energy and power costs for the building are certified to be reduced by a percentage greater than 25%. The applicable dollar value used to determine the increased deduction amount for certain property is $2.68 increased, but not above $5.36 cents by 11 cents for each percentage point by which the total annual energy and power costs for the building are certified to be reduced by a percentage greater than 25%. Wow. Hopefully our tax software will help us out with that one. In any case, highlights for changes in revenue procedure 2021-38. The tax year 2023 adjustments described below generally apply to tax returns filed in 2024. The tax items for tax year 2023 are greatest interest to most taxpayers include the following dollar amounts. So you got the standard deduction for married couples filing jointly for tax year 2023 rises to $27,700 up $1,800 from the prior year. For single tax period and married individuals filing separately, the standard deduction rises to $13,850 for 2023 up $900. And for heads of household, the standard deduction will be $20,800 for tax year 2023 up $1,400 from the amount for the tax year 2022. So we have the marginal rates for tax year 2023. The top tax rate remains 37% for individuals, single taxpayers with incomes greater than $578,125 $693,750 for married couples filing jointly. The other rates are 35% for incomes over $231,250 $462,500 for married couples filing jointly. So these are of course the progressive tax systems. So we're talking the rates and when the different rates will apply remembering that if you're in a higher tax bracket, that means you're still subject to the lower rates. But your last dollar, your marginal tax rate as opposed to your average tax rate will be at this highest rate is the general idea, right? So now we've got 32% is the next year for incomes over $182,100 $364,200 for married couples filing jointly. 24% is the next down on the progressive tiers for incomes over $95,375 $190,750 for married couples filing jointly. 22% for incomes over $44,725 $89,450 for married couples filing jointly and 12% for incomes over $11,000 $22,000 for married couples filing jointly. The lowest rate is 10% for incomes of single individuals with incomes of 11,000 or less 22,000 for married couples filing jointly. Then you've got the alternative minimum tax exemption amount for tax year 2023 is $81,300 and begins to phase out at $578,150 $126,500 for married couples filing jointly. For whom the exemption begins to phase out at $1,156,300. The 2022 exemption amount was $75,900 and began to phase out at $539,900 $118,100 for married couples filing jointly. For whom the exemption began to phase out at $1,079,800. So the tax year 2023 maximum earned income tax credit amount is $7,430 for qualifying taxpayers who have three or more qualifying children up from $6,935 for tax year 2022. That's that kind of quite confusing credit, but it has its virtues in that it's trying to incentivize people to work and so on, but it's kind of tied together with the number of children. So it'll be impacted by how many children are involved from one to three and so on and how much your income is. Okay, so the revenue procedure contains a table providing maximum EITC earned income tax credit amount for other categories, income thresholds and phase out. So that one gets obviously quite complex. So you got to look at the tables, which are all going to be adjusted for inflation and so on. So for tax year 2023, the monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking increases to $300 up $20 from the limit for 2022. For the taxable years beginning in 2023, the dollar limitation for employee salary reductions for contributions to help flexible spending arrangements increases to $3,050. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $610 and increase of $40 from taxable years beginning in 2022. For tax year 2023, participants who have self-only coverage in a medical savings account, the plan must have an annual deductible that is not less than $2,650 up $200 from tax year 2022, but not more than $3,950 and increase of $250 from tax year 2022. For self-only coverage, the maximum out of pocket expense amount is $5,300 up $350 from 2022. For tax year 2023, the family coverage, the annual deductible is not less than $5,300 up from $4,950 for 2022. However, the deductible cannot be more than $7,900 up $500 from the limit for tax year 2022. For family coverage, the out of pocket expense limit is $9,650 for tax year 2023 and increase of $600 from tax year 2022. For tax year 2023, the foreign-earned income exclusion is $120,000 up from $112,000 for tax year 2022. Estates of decedents who died during 2023 have a basic exclusion amount of $12,920,000 up from a total of $12,660,000 for estates of decedents who died in 2022. The annual exclusion for gifts increases to $17,000 for calendar year 2023 up from $16,000 for calendar year 2021. So, okay, it wasn't changed since 2021. So, the maximum credit allowed for adoptions for tax year 2023 is up the amount of qualified adoption expenses up to $15,950 up from $14,890 for 2022. Items unaffected by indexing. By statute, certain items that were indexed for inflation in the past are currently not adjusted. So, the personal exemption for tax year 2023 remains at zero as it was for 2022. This elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act. So, they had to remind us of that. You'll recall that they kind of totally reworked the tax code by then and they removed the exemptions. But in so doing, they also increased the standard deduction greatly so that more people would be taking the standard deduction in an attempt to kind of standardize the tax code a bit or have less people itemizing, which was thought to, I think, make the tax calculations easier and whatever. So that, yeah, for 2023, as in 2022, 2021, 2020, 2019 and 2018, there is no limitation on itemized deductions as that limitation was eliminated by the Tax Cuts and Jobs Act. The modified adjusted gross income amount used by joint filers to determine the reduction in the lifetime learning credit provided in section 25 AD 2 is not adjusted for inflation for taxable years beginning after December 31, 2020. The lifetime learning credit is phased out for taxpayers with modified adjusted gross incomes in excess of $80,000, $160,000 for joint filers. So obviously, that's a lot of numbers here. You can check these numbers out on your own. It's kind of an interesting indication of the impact of inflation and so on when you see when they're indexing these numbers for the taxes. So they, of course, will have a significant impact on many people. So you can check this out and there's a link to this in the description.