What to Expect as You Prepare Your Tax Return This Year
Last updated January 16, 2024
Most taxpayers won’t notice any major changes this filing season. There aren’t any new credits or deductions to learn about. However, the IRS did make larger-than-usual adjustments to about 60 tax code provisions to account for the effects of higher-than-normal inflation in 2022, including changing the income thresholds for the seven different tax brackets, and setting higher standard deduction amounts.
Without these tweaks cost-of-living pay raises could push taxpayers into higher tax brackets or reduce the value of their credits, deductions, and exemptions.
Listen to audio highlights of the story below:
“Rather than the typical small adjustments for inflation, the IRS made adjustments that are about 6.5 percent,” said Erica York, senior economist at the Tax Foundation, a non-partisan tax policy nonprofit. “Things like the standard deduction, and where the different tax brackets kick in, are quite a bit higher than they were in 2022.”
As a result of these adjustments, those who did not see their incomes increase in 2023 could find themselves in a lower tax bracket than when they filed their last returns.
2023 Tax Brackets
The lowest tax rate is 10 percent for single individuals with incomes of $11,000 or less ($22,000 for married couples filing jointly). The highest rate remains 37 percent for individual single taxpayers with incomes greater than $578,125 ($693,750 for married couples filing jointly).
Here are the other five brackets:
- 12 percent for incomes over $11,000 ($22,000 for married couples filing jointly)
- 22 percent for incomes over $44,725 ($89,450 for married couples filing jointly)
- 24 percent for incomes over $95,375 ($190,750 for married couples filing jointly)
- 32 percent for incomes over $182,100 ($364,200 for married couples filing jointly)
- 35 percent for incomes over $231,250 ($462,500 for married couples filing jointly)
Standard Deductions for 2023
The IRS also raised the standard deductions by about seven percent for those who don’t itemize.
- Married couples filing jointly: The standard deduction is $27,700, up $1,800 from the prior year.
- Single taxpayers and married individuals who file separately: The standard deduction increases to $13,850, up $900.
- Heads of households: The standard deduction is $20,800, up $1,400.
Taxpayers who are 65 and older or blind, and don’t itemize, can get an additional standard deduction that’s $100 more than last year. It’s now $1,500 for married couples and $1,850 for single filers and heads of households.
Note: Those who take the standard deduction cannot deduct charitable contributions. This change was made last year.
Tax Credits Can Reduce Tax Burden for Many
A tax credit, the IRS explains, “is a dollar-for-dollar amount taxpayers claim on their tax return to reduce the income tax they owe.” Eligible taxpayers can use credits to reduce their tax bill, and potentially increase their refund. Note: You must file a tax return to claim these credits.
- Earned Income Tax Credit: The maximum amount for qualifying taxpayers who have three or more qualifying children is $7,430 for 2023, up from $6,935 for tax year 2022.
- Child Tax Credit: This remains capped at $2,000 per qualifying dependent (under the age of 17), for those married taxpayers filing jointly with a modified gross income of $400,000 or less, or $200,000 or less for other filers.
- Adoption Credit: The maximum credit allowed is the amount of qualified adoption expenses, up to $15,950.
Other Significant Changes for this Filing Season
The IRS made several other adjustments to account for inflation, including:
- Alternative Minimum Tax: The new exemption is $81,300; it begins to phase out at $578,150. For married couples filing jointly, the exemption is $126,500; it begins to phase out at $1,156,300.
- Foreign Earned Income Exclusion: $120,000, up from $112,000 for tax year 2022.
- Estate Taxes: The basic exclusion from federal estate taxes is now $12,920,000 for someone who died during 2023, up $860,000 from 2022.
- Gifts: The annual exclusion increases to $17,000 for calendar year 2023, up from $16,000 in 2022.
Clean Vehicle Credit
If you bought a new plug-in electric (EV) or fuel cell vehicle (FCV) in 2023, you might qualify for a Clean Vehicle Tax Credit of up to $7,500. The credit is limited to certain EV and FCV vehicles manufactured in North America and is based on MSRP, sourcing of battery components, and delivery date. There are also income limits. Your modified adjusted gross income (AGI) cannot exceed $300,000 for married couples filing jointly, $225,000 for heads of households, and $150,000 for all other filers.
The 2024 filing season officially starts on January 29; that’s when the IRS will start accepting and processing 2023 tax returns.
For most taxpayers, the deadline to file their federal tax return, pay any tax owed, or request an extension to file is Monday, April 15, 2024.
Taxpayers living in Maine or Massachusetts have until April 17, 2024, due to the Patriot's Day and Emancipation Day holidays. If a taxpayer resides in a federally declared disaster area, they also may have additional time to file.
Getting a Refund?
In most cases, if there are no errors and the return is complete, you should have your money in less than 21 calendar days. Mail in your return, and it could take four weeks or more for the IRS to process it.
With direct deposit, you can have your refund sent to as many as three different accounts: a checking or savings account, a prepaid debit card, or a mobile payment app.
The IRS says eight out of 10 taxpayers use direct deposit because it’s “simple, safe, and secure.” This is the same electronic transfer system used to deposit nearly 98 percent of all Social Security and Veterans Affairs benefits into millions of accounts.
By law, the IRS cannot issue refunds before mid-February to taxpayers who claim an Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC). The IRS said it expects most of the refunds for these returns to be available by February 27 (possibly earlier) if the taxpayer chooses direct deposit and there are no other issues.
To check the status of your refund, use the Where’s My Refund? tool on the IRS website.
If you owe money, you don’t have to make any payment until the April 15 filing deadline, which may give you time to save up. If you can’t afford to pay what you owe by April 15, check if you qualify for an IRS payment plan.
Free Help and Free Filing
IRS Free File is available to individuals or families with an Adjusted Gross Income of $79,000 or less in 2023. This year, eight commercial tax preparation companies are taking part in the program. DO NOT search for “file my taxes for free”—you could end up on the website of a scammer. Instead, use the links provided by the IRS on its Free File page.
Each tax prep company participating in the program sets its own eligibility rules based on age, income, and state residency. If you meet a company’s requirements, the provider cannot charge for preparing and filing your federal tax return.
Note: Some IRS Free File providers charge a fee to prepare state income tax returns. Any state tax preparation or non-qualifying fees must be disclosed upfront on the provider’s IRS Free File landing page.
Unless they obtain your informed and voluntary consent, IRS Free File providers are prohibited from disclosing or using your information for purposes other than preparing your tax return.
The IRS also offers free basic tax return preparation to qualified individuals through its Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs. These programs are available to taxpayers with adjusted gross incomes of less than $64,000, are 60 years and older, have disabilities, or speak limited English. At selected sites, taxpayers can input and electronically file their own tax return with the assistance of an IRS-certified volunteer.
MilTax is a free resource from the Department of Defense. It includes tax preparation and electronic filing software, as well as personalized support from military tax experts. MilTax is designed to assist with issues involving deployments, combat and training pay, housing, and multi-state filings. Eligible service members (and some veterans) can use MilTax to electronically file a federal tax return and up to three state returns for free.
New Option for Some: Direct File
The IRS will test its new Direct File system in a dozen states. This pilot program provides a new way for low- to moderate-income taxpayers to file their returns directly with the IRS online for free. To take part, taxpayers’ incomes must be limited to W-2 wages, Social Security, or unemployment benefits, and income interest income of $1,500 or less. They must also take the standard deduction.
Direct File won’t be available for gig economy workers, those with business income, or those who itemized deductions or claim credits, such as Child and Dependent Care Credit, Saver’s Credit, or Premium Tax Credit.
Eligible taxpayers aren’t required to use this new IRS program; you can still use commercial tax-preparation software or file paper forms. Direct File was built by IRS designers, software engineers, and tax experts. All the other options to prepare returns and e-file for free involve third-party companies.
Direct File is being rolled out in phases. It’s expected to be widely available by mid-March in the following designated states: Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington, and Wyoming.
IRS Promises Better Customer Service
In announcing the official start of this year’s tax season, the IRS said it “continues to make improvements” to help taxpayers. The agency will provide more in-person service by opening or reopening Taxpayer Assistance Centers and extending hours at many locations. To decrease wait times on the phone, the IRS added staff and expanded the customer callback feature on its toll-free line, 800-829-1040.
The Where’s My Refund? tool, the agency’s most popular service, is being redesigned to provide more information and reduce the need to call the toll-free line. If all goes as planned, a generic message, such as “Your return is still being processed, check back later,” will be replaced with “clear and more detailed updates” written in “plain language,” the IRS promised.
You’ll find a variety of online tools at IRS.gov, as well as information on how to get ready to prepare your tax return.
The Interactive Tax Assistant tool provides specific answers to many common tax questions based on your individual circumstances. It can determine if you should file a return, your filing status, if someone can be claimed as a dependent, which income is taxable, what expenses can be deducted, and qualifications to claim tax credits.
Create an IRS Online Account and you can securely access personal tax account information, including balance, payments, and tax records including adjusted gross income.
Choosing the wrong tax preparer can have serious financial consequences. The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help you find a preparer. The IRS also has tips for choosing a tax preparer and how to avoid illegal "ghost" return preparers.
Changes Ahead for Next Year
The IRS has already announced inflation adjustments for tax year 2024—the return that’s due by April 2025. Income levels for the various tax brackets have been updated, and the standard deduction will also increase: $29,200 for married couples filing jointly, $14,600 for single taxpayer and married individuals filing separately, and $21,900 for heads of households.
More Info from the IRS: Frequently Asked Questions
Contributing editor Herb Weisbaum (“The ConsumerMan”) is an Emmy award-winning broadcaster and one of America's top consumer experts. He has been protecting consumers for more than 40 years, having covered the consumer beat for CBS News, The Today Show, and NBCNews.com. You can also find him on Facebook, Twitter, and at ConsumerMan.com.