On December 23, 2022, Congress passed the Consolidated Appropriations Act of 2023. The sprawling year-end spending “omnibus” package includes two important new laws that could affect your financial planning: the Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act (also known as SECURE 2.0) and the Conservation Easement Program Integrity Act.
Tax-bracket thresholds increase for each filing status but, because they’re based on percentages, they increase more significantly for the higher brackets. For example, the top of the 10% bracket increases by $725, to $1,450, depending on filing status, but the top of the 35% bracket increases by $22,950 to $45,900, again depending on filing status.
2023 Ordinary-Income Tax Brackets |
||||
Tax Rate |
Single |
Head of Household |
Married Filing Jointly or Surviving Spouse |
Married Filing Separately |
10% |
$0 - $11,000 |
$0 - $15,700 |
$0 - $22,000 |
$0 - $11,000 |
12% |
$11,001 - $44,725 |
$15,701 - $59,850 |
$22,001 - $89,450 |
$11,001 - $44,725 |
22% |
$44,726 - $95,375 |
$59,851 - $95,350 |
$89,451 - $190,750 |
$44,726 - $95,375 |
24% |
$95,376 - $182,100 |
$95,351 - $182,100 |
$190,751 - $364,200 |
$95,376 - $182,100 |
32% |
$182,101 - $231,250 |
$182,101 - $231,250 |
$364,201 - $462,500 |
$182,101 - $231,250 |
35% |
$231,251 - $578,125 |
$231,251 - $578,100 |
$462,501 - $693,750 |
$231,251 - $346,875 |
37% |
Over $578,125 |
Over $578,100 |
Over $693,750 |
Over $346,875 |
Like the regular tax brackets, the AMT brackets are annually indexed for inflation. For 2023, the threshold for the 28% bracket will increase by $14,600 for all filing statuses except married filing separately, which increased by half that amount.
2023 AMT Brackets |
||||
Tax Rate |
Single |
Head of Household |
Married Filing Jointly or Surviving Spouse |
Married Filing Separately |
26% |
$0 - $220,700 |
$0 - $220,700 |
$0 - $220,700 |
$0 - $110,350 |
28% |
Over $220,700 |
Over $220,700 |
Over $220,700 |
Over $110,350 |
The lifetime exemption is $12,920,000 with a top tax rate of 40%. A surviving spouse may be able to use the deceased spouse’s unused estate tax exemption. The annual gift tax exclusion is $17,700 per recipient.
The Social Security Administration recently announced that the wage base for computing Social Security tax will increase to $160,200 for 2023 (up from $147,000 for 2022). Wages and self-employment income above this threshold aren’t subject to Social Security tax.
There’s a maximum amount of compensation subject to the Social Security tax, but no maximum for Medicare tax. For 2023, the FICA tax rate for employers is 7.65% — 6.2% for Social Security and 1.45% for Medicare (the same as in 2022).
For 2023, an employee will pay:
For 2023, the self-employment tax imposed on self-employed people is:
The IRS recently announced cost-of-living adjustments that apply to the dollar limitations for pensions, as well as other qualified retirement plans for 2023. The amounts increased more than they have in recent years due to inflation.
The 2023 contribution limit for employees who participate in 401(k) plans will increase to $22,500 (up from $20,500 in 2022). This contribution amount also applies to 403(b) plans, most 457 plans and the federal government’s Thrift Savings Plan.
The catch-up contribution limit for employees age 50 and over who participate in 401(k) plans and the other plans mentioned above will increase to $7,500 (up from $6,500 in 2022). Therefore, participants in 401(k) plans (and the others listed above) who are 50 and older can contribute up to $30,000 in 2023.
The limitation for defined contribution plans, including a Simplified Employee Pension (SEP) plan, will increase from $61,000 to $66,000. To participate in a SEP, an eligible employee must receive at least a certain amount of compensation for the year. That amount will increase in 2023 to $750 (from $650 for 2022)
Deferrals to a SIMPLE plan will increase to $15,500 in 2023 (up from $14,000 in 2022). The catch-up contribution limit for employees age 50 and over who participate in SIMPLE plans will increase to $3,500 in 2023, up from $3,000.
The IRS also announced that in 2023:
The 2023 limit on annual contributions to an individual IRA will increase to $6,500 (up from $6,000 for 2022). The IRA catch-up contribution limit for individuals age 50 and older isn’t subject to an annual cost-of-living adjustment and will remain $1,000.
Business professionals need easy access to information to make timely decisions. SVA has what you need, when you need it. Choose a topic below or just contact us directly. Our expertise is ready anytime you need it.
The best way to stay current on all the ways your business can save time and money is to enlist an experienced accounting firm. SVA can help you with:
Tax planning should occur all year long, not just at year-end. SVA’s tax team is always in the know about the latest legislation and will help you minimize your business tax burden. Along with all the tax credits listed above, SVA can also help you with:
The tax-deferred exchange remains the most important tool in planning for non-personal real estate transactions. The 1031 exchange is a swap of one investment property for another, allowing capital gains to be deferred.
We work with clients to navigate the many rules and regulations that affect these transactions. We also will act on our clients’ behalf to arrange and act as a liaison between the various other professionals required to complete the transaction according to strict IRS rules.
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Everyone is familiar with sales tax and the role it plays as a consumer. However, understanding the complexities and laws involved with sales and use tax as it applies to business is another story.
Reduce the impact of sales tax on not only your business but your customers by proactively planning for the tax consequences of your business-related activities.
There are many tax credits currently available, along with new ones available each year based on stimulus legislation and changing presidential leadership. Here are a few SVA can help you with:
Nexus, also known as sufficient physical presence, determines whether an out-of-state business selling products into a state is liable for collecting sales and use tax on sales into the state. Nexus is required before a taxing jurisdiction can impose its taxes on an entity. Congress enacted Public Law 86-272 which protects companies with only minimal state activities from being taxed.
Our professionals can assist you in determining your company's multistate tax situation, take steps to insulate your activities from overzealous states, and minimize your overall state tax liability.
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Paycheck Protection Program (PPP) funds provided billions in economic relief for businesses. The program includes round 1 funding, round 2 funding and loan forgiveness opportunities. Each round has specific guidelines and determining when to apply for funds and forgiveness requires talking with a tax expert.
Navigating the other credits like the Employee Retention Credit that work together with the PPP funds can be complex. SVA has a team of experts who consistently monitor the latest news regarding these programs from the SBA and legislative efforts.
This eguide covers different tax credits and deductions available to businesses, as well as what to look for in a tax advisor, choosing a tax-advantaged business entity and more!
Visit SVA’s Web Tax Guide to access a wide array of resources that can help prepare you and your business for the upcoming tax season.
This easy-to-use resource has all the tax rates, deductions, credits and limits in a quick view format.
This eguide describes what depreciation is, the different types, how to calculate them, and answers common questions about depreciation.
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