2023 Tax Changes - Part 3

Name: 2023 Tax Changes - Part 3
Uploaded: 2023-03-16
Duration: 2 min 7 s
Description: In Part 3 of the series, Chris shares changes in how deductions are calculated this year. Make sure to check out the entire series!

Video Transcript

My name is Chris and welcome back to Money Burst. This is part three in our four-part series talking about the changes coming this 2023 tax season.

In this video I want to focus on charitable deductions. Now back in 2020 the CARES Act allowed taxpayers to deduct up to $600, if you were married, in charitable donations and you didn't even need to itemize your deductions.

Now I know me saying itemized deductions probably just means nothing to a lot of you, so let me quickly break down what that means. So, when you file your taxes, you can choose to either take what's called the standard deduction or to itemize your deductions. A deduction basically reduces the amount of income that's subject to taxes, it's kind of like you make this much and you can just knock off you know X amount of thousands of dollars, before we start calculating how much taxes you're going to pay.

So, the standard deduction in 2022, because that amount does change every year, was $12,950, if you're single or $25,900 if you're married filing jointly with your partner. But if you decide to take that standard deduction, you cannot deduct individual things like donations you make or the interest you pay in your mortgage, it's an either or right you take the standard deduction or you choose to itemize.

If you choose to itemize you have to prepare an itemized list of all these things that you're planning to deduct that are eligible. That is the key, you can't just choose whatever you want, the IRS has a list of things that are eligible to be deducted. But if you go through and tally up all of those things and that list of itemized items is less than the standard deduction then you might as well just take the standard deduction.

But in 2020 when the CARES Act came around, it allowed you to deduct up to $600 if you're married or $300 if you're single. Even if you took that standard deduction, which was a great benefit, and then it later got extended through to 2021 but in 2022 sadly it went away.

Now this doesn't mean you shouldn't donate; it just means that when you file your taxes if you're taking the standard deduction you won't get any type of you know special the tax benefit for it.