The official date for filing your 2023 taxes in 2024 hasn’t been officially announced by the IRS yet, but based on recent years, you can expect to start filing sometime in late January.
Here’s what we know so far:
- Last year (2023), the IRS began accepting 2022 returns on January 23rd.
- This year, the official tax deadline is April 15th, 2024.
- Employers are required to send employees their W-2 and 1099 income tax forms by the end of January.
- So if you’re awaiting some tax forms, February 1 is when you should reach out if they haven’t been received yet.
While we don’t have a specific date yet, it’s safe to say you can likely start filing your taxes sometime in late January. Stay tuned for an official announcement from the IRS for the exact date.
So what can you do when you’re anticipating a change, say selling a house, or if you had a promotion + a raise, or say the opposite side, a job change with a PTO payout and potentially a period of filing for unemployment? Let’s dive in to what you can prepare up front.
1. If you sold a house in 2023
If you sold and bought a house within the same year (2023), your tax situation depends on a few key factors: capital gains/losses, home sale exclusions, adjustment for new income.
If you sold your house for more than you paid for it (including selling costs), you’ll have a capital gain. Typically, capital gains are taxed at federal rates, depending on your income bracket. If however, you sold your house for less than you paid for it, you’ll have a capital loss. While capital losses can typically offset capital gains, there are limitations on how much you can deduct each year.
Now if you the house you sold was your primary residence for at least two of the five years before the sale, you can exclude up to $250,000 of the profit from your taxable income ($500,000 if married filing jointly). This rule can significantly reduce your tax liability.
Meanwhile, if you bought a new primary residence of equal or greater value within two years of selling your old one, you can defer paying capital gains tax on the sale under a 1031 exchange. However, specific rules and requirements apply to qualify for this exchange.
Finally, there’s a basis adjustment for new home. For instance, if you rolled proceeds from selling your old house into a new one at a higher price, but didn’t qualify for a full exclusion or exchange, the cost basis of your new home is adjusted. This means your gain on the sale of your new home will be calculated based on the higher cost basis.
2. If you got a raise or bonus
Make sure you check if you’re now in a higher tax bracket. Your increased income from the promotion, raise, and bonus might push you into a higher tax bracket for 2023. Calculate your estimated tax liability to avoid surprises when filing.
Next, consider adjusting your tax withholding at your workplace. This is important so you don’t get caught with any surprises come tax time. For instance, if you feel your current withholdings aren’t capturing enough of your new income, then increase it to avoid owing taxes at filing time.
Finally, look into possible tax credits. Review if you’re eligible for any tax credits based on your new income level, such as the Earned Income Tax Credit or the Child Tax Credit.
3. If you lost a job or collected unemployment in 2023
Navigating job loss, severance, unemployment, and a new job in one year can be financially and emotionally challenging. Here’s what to expect regarding your 2023 taxes.
If you had severance pay, here are some elements to consider:
- Income Inclusion: Your severance pay is considered taxable income. You’ll receive a separate W-2 form from your former employer for the severance amount.
- Federal and State Taxes: Both federal and state income taxes will likely be withheld from your severance pay unless you opted out.
- Lump-Sum or Spreads: If your severance package allows spreading the payout over multiple years, consider consulting a tax advisor to optimize tax implications.
If you applied for unemployment benefits, you may have the following:
- Taxable Income: Unemployment benefits are generally considered taxable income at the federal level and may also be taxable in your state. You’ll receive a 1099-G form from the unemployment agency documenting your benefits received.
- Estimated Taxes: If you haven’t been paying estimated taxes throughout the year, you might owe taxes when filing your return. Consider increasing your tax withholding at your new job to avoid a lump sum payment later.
Finally, if you’ve landed a new job, then the main thing to consider is your tax withholdings. This way, you can ensure enough is withheld to cover your expected tax liability. You may also be eligible for deductions and credits:
- Job Search Expenses: You may be able to deduct certain job search expenses. This could include resume preparation costs or travel expenses for interviews, on your tax return.
- Health Insurance Costs: If you purchased health insurance while unemployed, you might be eligible for the premium tax credit to offset the cost.
- Earned Income Tax Credit (EITC): If you have earned income for the year, including the new job and unemployment benefits, you might be eligible for the EITC, which can provide a tax refund.
As always, reach out to Huddleston Tax CPAs for additional questions, nuances, and information.