Trucking & Taxes – December 2022/January 2023

Each new year brings new taxes, new deadlines and deductions.

Some things change, some don’t. This year they have kept the increase in charitable giving deductions (if you don’t itemize), and the expanded Child Tax Credit went away (parents were missing the extra cash in the bank each month).

The main details you need to know for the 2023 tax season:

• The big tax deadline for all individual and C corporation federal tax returns and payments is April 18.
• Partnerships and S corporations federal tax returns deadline is March 15.
• The standard deduction for 2022 increased to $12,950 for single filers and $25,900 for married couples filing jointly.
• The IRS for the tax year 2023 increased the standard deduction for single filers by $900, for a total of $13,850 in 2023. For joint filers, the amount increases by $1,800, for a total standard deduction of $27,700. The standard deduction is taken by about 90% of all U.S. tax filers.
• Income tax brackets increased in 2022 but not enough to account for inflation.

Tax Bracket 2023 vs. 2022

The income tax bracket threshold increased for single filers:

The income tax bracket threshold increased for joint filers:

The tax bracket adjustments made each year help avoid “bracket creep,” which is an increase in taxable income even when income has lost its purchasing power due to inflation.

Deductions and credits

Tax deductions and credits will help you keep more money in your pocket instead of the government’s but in slightly different ways.

• Tax deductions help lower the amount of your income that is taxed. Some deductions are only available if you itemize your deductions, while others are still available even if you decide to take the standard deduction.
• On the other hand, tax credits are dollar amounts subtracted from your tax bill, and there are two types: refundable and nonrefundable. If a credit is greater than the amount you owe and is refundable, the difference is paid to you as a refund. If it is a nonrefundable credit, your tax bill will be reduced to zero, but you won’t get a refund. Still a win!

Here are some deductions and credits you might be able to claim on your 2022 tax return.

Charitable deductions

The Taxpayer Certainty and Disaster Tax Relief Act of 2020 extended two charitable giving changes enacted by the Coronavirus Aid, Relief, and Economic Security Act. The law allows you to deduct up to 100% of your adjusted gross income, which is your total income minus other deductions you have already taken, in qualified charitable donations if you plan to itemize your deductions.

What if you are taking the standard deduction? Well, taxpayers not itemizing may claim an above-the-line deduction (meaning it is not on Schedule A) of up to $300 ($600 for married filing jointly) for charitable contributions made in cash.

Business deductions

If you’re self-employed, you can claim a bunch of deductions on your tax return – including travel expenses and the home office deduction if you use a part of your home exclusively to conduct business.

But if you’re working remotely from home, you won’t be able to claim the home office deduction since it’s reserved for self-employed people only.

Earned Income Tax Credit

The EITC is a refundable credit designed to help low-income and middle-income households. Depending on your income, filing status and the number of children, the credit could save you anywhere from a few hundred to $6,728 on your taxes. The maximum adjusted gross income for a single filer with no children is $21,430, while the cap for a married couple with three or more children is $57,414.

Child tax credit

The maximum child tax credit amount decreased in 2022. In 2021, the enhanced child tax credit meant that taxpayers with children ages 6 to 17 could get a credit of up to $3,000. For children under 6, the amount jumped to $3,600. For 2022, that amount reverted to $2,000 per child dependent 16 and younger.

In 2022, the tax credit will be refundable only up to $1,500 (up from $1,400 in 2020 to adjust for inflation), depending on your income, and you must have earned income of at least $2,500 even to be eligible for the refund.

In 2022, the advance payment option was no longer available, and parents will receive their credit as usual when they file their returns for the 2022 tax year.

Educational credits

The American Opportunity Tax Credit is a partially refundable credit for educational expenses for a student for the first four years of college. You can claim up to $2,500 per student. If the credit brings your tax liability to zero, then up to $1,000 is refundable.

The Lifetime Learning Credit is not refundable and covers up to $2,000 in qualified educational expenses per return. While you can only take advantage of the American Opportunity Tax Credit for undergrad expenses, you can reap the benefits of the Lifetime Learning Credit for expenses related to all kinds of educational opportunities – from degree programs to technical classes to improving job skills.

You can claim both of these credits on your tax return but not for the same student or the same expenses.

Contribute to your health savings account

You might qualify for a health savings account if you’re in a high-deductible health plan. Your contributions are pre-tax, which reduces your taxable income. Annual contribution amounts are higher for the 2022 tax year:

• $3,650 individual coverage (up $50)
• $7,300 family coverage (up $100)
• Individuals ages 55 and older can make an additional $1,000 catch-up contribution.

The HSA contribution deadline for the 2022 tax year is April 18, 2023.

Much of this information was summarized from the Internal Revenue code or pulled from the IRS.gov website.

The year’s final weeks are a great time to meet with your tax professional. We can help with year-end planning! We can review your financial situation with your tax professional and discuss how you can take advantage of these and other tax-saving opportunities. LL

Read about how to maximize your deductions here.