The AMT exemptions and exemption phaseouts are also indexed. The exemption amounts for 2023 will be:
- $81,300 for singles
- $126,500 for joint filers
That is an increase of $5,400 and $8,400, respectively, over 2022 amounts.
The inflation-adjusted phaseout ranges for 2023 will be:
- $578,150 – $903,350 (singles)
- $1,156,300 – $1,662,300 (joint filers)
Amounts for married couples filing separately are half of those for joint filers.
Education and child-related breaks
The maximum benefits of certain education and child-related breaks generally remain the same for 2023. But most of these breaks are limited based on a taxpayer’s modified adjusted gross income (MAGI). Taxpayers whose MAGIs are within an applicable phaseout range are eligible for a partial break — and breaks are eliminated for those whose MAGIs exceed the top of the range.
The MAGI phaseout ranges will generally remain the same or increase modestly for 2023, depending on the break. For example:
The American Opportunity credit. For tax years beginning after Dec. 31, 2020, the MAGI amount used by joint filers to determine the reduction in the American Opportunity credit isn’t adjusted for inflation. The credit is phased out for taxpayers with MAGI in excess of $80,000 (or $160,000 for joint returns). The maximum credit per eligible student is $2,500.
The Lifetime Learning credit. For tax years beginning after Dec. 31, 2020, the MAGI amount used by joint filers to determine the reduction in the Lifetime Learning credit isn’t adjusted for inflation. The credit is phased out for taxpayers with MAGI in excess of $80,000 (or $160,000 for joint returns). The maximum credit is $2,000 per tax return.
The adoption credit. The phaseout ranges for eligible taxpayers adopting a child will also increase for 2023 by $15,820 to $239,230 – $279,230 for joint, head-of-household, and single filers. The maximum credit will increase by $1,060 to $15,950 for 2023.
(Note: Married couples filing separately generally aren’t eligible for these credits.)
These are only some of the education and child-related breaks that may benefit you. Keep in mind that, if your MAGI is too high for you to qualify for a break for your child’s education, your child might be eligible to claim one on their tax return.
Gift and estate taxes
The unified gift and estate tax exemption and the generation-skipping transfer (GST) tax exemption are both adjusted annually for inflation. For 2023, the amounts will be $12.92 million (up from $12.06 million for 2022).
The annual gift tax exclusion will increase by $1,000 to $17,000 for 2023.
Retirement plans
Nearly all retirement-plan-related limits will increase for 2023. Depending on your plan, you may have some opportunities to increase your retirement savings if you’ve already been contributing the maximum amount allowed.
Your MAGI may reduce or even eliminate your ability to take advantage of IRAs. Fortunately, IRA- related MAGI phaseout range limits all will increase for 2023:
