Updates to US Tax Regulations for the 2023 Season: Individual, Estate, and Gift Tax Revisions

As we enter the annual tax filing season, I’m thrilled to highlight some important changes for the 2023 tax year compared to previous years:

  • Fresh Look for Form 1040: You’ll notice a slight change on the first page of Form 1040. The filing status field has been relocated below the taxpayer’s information section.

  • Standard Deduction Boost: Great news! The standard deduction amounts have been adjusted to keep pace with inflation:
    1. – For those filing as Single or Married filing separately: $13,850 (with an additional $1,850 for individuals 65 years and older).
    2. – Married filing jointly or Qualifying surviving spouse: $27,700 (with an extra $1,500 for each spouse aged 65 or older).
    3. – Head of household: $20,800 (plus $1,850 for individuals 65 years and older).

  • Foreign Earned Income Exclusion: If you earn income abroad, the exclusion amount has been raised to $120,000 for 2023.

  • Child Tax Credit Update: There’s now a $100 increase in the Additional Child Tax Credit, making it $1,600 per qualifying child. However, the overall Child Tax Credit remains at $2,000 per qualifying child.

  • Annual Gift Exemption: You can now give up to $17,000 per donee in 2023 (up from $16,000 in 2022). Remember, these gifts must be of a “present interest,” and gifts in trust are generally not allowed. Additionally, for gifts to non-US citizen spouses, the exclusion has increased to $175,000.

Looking ahead to 2024, keep in mind that the annual gift tax exclusion will be $18,000 per donee and $185,000 for gifts to non-US citizen spouses.

Furthermore, for estate and gift taxes, the lifetime exclusion amount for 2023 is $12,920,000, and for 2024, it’s $13,610,000.

And here’s a crucial point: If you’re taking advantage of the increased gift tax exclusion amount due to the Tax Cuts and Jobs Act, rest assured that you won’t be negatively impacted after 2025 when the exclusion amount is set to decrease.

For a convenient list of 2024 US deadlines related to the 2023 tax year, please refer to [link to the article]. If you have any questions or are considering significant gifts, feel free to reach out to understand the tax implications better.

Let’s navigate this tax season together!