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Important Tax Information for the Upcoming Filing Season

As we approach the 2023 tax filing deadline, we wanted to provide you with some information that may be helpful.

Furthermore, the current tax laws are constantly changing, especially with the sunsetting of the Tax Cuts and Jobs Act at the end of 2025. With all the changes, it can be difficult to understand all available tax opportunities–and prepare in advance for likely changes. That's why it's essential to work with a financial and tax professional to help you manage your deductions and your liability.

Some key information that may be helpful as you prepare your 2023 taxes include:

The Standard Deduction Increased Slightly

After an inflation adjustment, the 2023 standard deduction increased to $13,850 for single filers and married couples filing separately. For married couples filing jointly, the standard deduction rises to $27,700.

Itemized Deduction Rules Largely Unchanged

  • State and local taxes: The deduction for state and local income taxes, property taxes, and real estate taxes is capped at $10,000.
  • Mortgage interest deduction: The mortgage interest deduction is limited to $750,000 of debt. But people who had $1,000,000 of home mortgage debt before December 16, 2017, will still be able to deduct the interest on that loan.
  • Medical expenses: Only medical expenses that exceed 7.5% of adjusted gross income (AGI) can be deducted in 2023.
  • Charitable donations: In 2023, the annual income tax deduction limit for gifts of cash to public charities is 60% of adjusted gross income.

Child Tax Credit

Filers can continue claiming a $2,000 Child Tax Credit for each dependent under 17 years old. The credit is also subject to a phase-out starting at $400,000 for joint filers and $200,000 for single filers.

Alternative Minimum Tax Exemption Increased

Until the AMT exemption–enacted by the Tax Cuts and Jobs Act–expires at the end of 2025, AMT will continue to affect households with incomes over $500,000. For 2023, the AMT exemptions are $81,300 for single filers and $126,500 for married taxpayers filing jointly. The phase-out thresholds are $1,156,300 for married taxpayers filing a joint return and $578,150 for all other taxpayers.

Higher Exclusion for Annual Tax-Free Gifts

The estate and gift tax exemption, which is indexed to inflation, rose to $12,920,000 per individual for 2023. This amount is expected to be cut by potentially 50% when the Tax Cuts and Jobs Act sunsets at the end of 2025, providing many with an opportunity to prepare ahead.

The annual gift exclusion increased to $17,000 per recipient, up $1,000 from 2022. The gifting exclusion allows you to gift money each year without incurring any tax liability or using up any of your lifetime estate.

What To Do with Those Unused 529 Funds

529 rollover to Roth IRA

Congress included a provision in SECURE 2.0 that allows for rollovers of unused 529 funds to Roth IRAs. Under the old tax rules, if funds in a section 529 plan are not used for education, the earnings are taxable and subject to a 10% penalty. Now, Congress included a provision in SECURE 2.0 that allows for rollovers of unused 529 funds to Roth IRAs.

According to the Journal of Accountancy, here's what you need to know about the new 529-to-Roth rollover provision:

  • This provision takes effect in 2024, not 2023.
  • The 529 plan must be open for at least 15 years.
  • The lifetime limit for the rollover is $35,000 per beneficiary.
  • The Roth IRA must be in the name of the beneficiary of the 529 plan.
  • Any contributions made within the past five years (and earnings on those contributions) are ineligible to be moved into the Roth IRA.
  • The annual limit on the rollover is the IRA contribution limit for the year, less any other IRA contributions.
    • For example, the current IRA contribution limit is $6,500. If the beneficiary made any IRA contributions, the rollover amount must be reduced by those contributions. Therefore, if the beneficiary contributed $2,000 to any IRA, the amount available for rollover is $4,500.
    • Consequently, getting to the $35,000 lifetime limit may take more than five years.
  • The rollover must be a plan-to-plan or trustee-to-trustee rollover. This means you cannot take a check from the 529 plan to deposit into the IRA.
  • The beneficiary is not subject to income limitations to contribute to a Roth IRA. For example, even if the beneficiary's income is over $153,000 (if single), the beneficiary can make a rollover from the 529 plan to the Roth IRA.
  • The beneficiary must have earned income, and the amount that can be rolled over is the lesser of earned income or the IRA contribution limit. Therefore, if the beneficiary is not working, no rollover is available because there is no earned income.



The article is designed to provide a high-level educational overview, and taxpayers should, of course, consult with their tax professional to assess their specific situation. We work with our clients in partnership with their tax professionals to help them navigate the tax laws. Our goal is to make clients aware of all the applicable tax opportunities and potentially pay less taxes now and in retirement.

We hope you find this information helpful. Please don't hesitate to reach out to us if you would like to learn more about our Wealth Management services and how we can specifically help you.

Scott Krase
Wealth Manager
Connor & Gallagher OneSource (CGO)

Published February 23, 2024



 Schwab.com, December 4, 2023. "2023 Taxes: 8 Things to Know Now" URL: https://www.schwab.com/learn/story/taxes-things-to-know-now

This blog is for educational and/or informational purposes only and does not constitute tax, financial, or legal advice.

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