What to know about changes impacting your wallet in the New Year

The start of every New Year brings about a lot of change, some of which may have an impact on your wallet. Financial expert Justin Reppy from Goldstone Financial Group said there are several new money rules consumers should be aware of this year.

Child Tax Credit

• For the 2022 filing season, the child tax credit and the child and dependent care tax credits have both been reduced.
• The child tax credit decreased to $2,000 per child. The child and dependent care tax credit is capped at $3,000 for one dependent or $6,000 for multiple dependents.

Charitable deductions

• Last year, charitably-minded taxpayers could claim a deduction of up to $300 in donations or $600 for those filing jointly.
• This year, that tax break is no longer in place and you can only receive a deduction if your itemized deductions exceed the standard deduction.

Form 1099-K

• The IRS has pushed back its requirement for Form 1099-K until next year when you complete your 2023 returns.
• Originally expected to take effect this year, Form 1099-K is required if you run a side job and collect payments using Venmo, PayPal or another similar app, and earn over $600.
• Keep in mind, transactions like paying a friend for dinner or sending money to a roommate for utilities do not qualify for this form. Only business transactions need to be reported.

What other tax changes should you be aware of for 2023?

• Although these tax changes will not affect your tax returns for 2022, it's important to know about 2023 tax changes, because it may affect your tax withholdings, your retirement contributions or other financial decisions throughout the year.
• The IRS adjusts the income tax brackets every year to keep pace with inflation, but because of unusually high inflation, the adjustment for 2023 is more significant.
• You can check your income bracket on irs.gov. If your tax bracket is changing, make sure to adjust your withholding to avoid a big tax bill or refund in 2024.
• In 2023, the contribution limits for 401(k)s, 403(b)s, 457 plans and Thrift Savings Plans have increased to $22,500. Catch-up contributions have risen to $7,500.
• You can contribute an extra $500 to your IRA in 2023, with a total maximum of $6,500.

What other new rules should you be aware of in 2023?

• Starting in 2023, Social Security benefits are increasing by 8.7% - the biggest cost-of-living adjustment, or COLA, since 1982.
• On average, retirees will get an extra $146 per month from Social Security, bumping the average benefit to $1,827.
• A lot of people receiving Social Security benefits are on Medicare, and Medicare part B premiums are decreasing in 2023.

• Be strategic about when you start taking Social Security, in order to maximize your benefit amount. We often help clients work through this important decision. You can learn more about our retirement planning process on our website, goldstonefinancialgroup.com.

The Secure Act 2.0 was recently signed into law. How will this impact retirement savers?

• Dozens of retirement planning provisions, known as the Secure Act 2.0, were included in recently passed legislation as part of the federal spending bill for 2023.
• New regulations increased the starting age for Required Minimum Distributions or RMDs to 73 beginning in 2023.
• Other changes include increased catch-up contributions, automatic enrollment in employer-sponsored retirement plans and a retirement savings match for student loan payments. These other benefits will not go into effect until 2024 or 2025.

Why is it important to look out for new financial rules?

• No one wants to be caught off guard. Keeping an eye on these changes can help set you up for financial success not just now but in the future.
• Talk to a financial professional about how you can plan for any changes that could affect your plan.
• I see a lot of people with portfolios who are hoping their way through retirement. Hope is a horrible strategy. Our retirement roadmap provides a plan to help you retire with confidence.

SEE ALSO | New laws in Illinois 2023: Full list of laws taking effect January 1