Standard Deduction can be seen as a relief on the taxable income provided by the IRS to individuals. However, these deductions are based on the filing status of these individuals. It is quite common for individuals to utilize the standard deductions when it comes to saving more.
Another important thing to note about standard deduction is that it doesn’t stay the same. Due to inflation adjustments and changes in the tax law, the standard deduction changes. In this blog, we will be discussing the impact of recent tax reform on the standard deduction for tax year 2023.
Standard Deduction Amounts for Tax Year 2023
Per the inflation rise, the IRS has once again announced adjustments in standard deductions for tax year 2023. Below are the standard deduction amounts for tax year 2023:
- Married couples filing jointly: $27,700, an $1,800 increase from 2022.
- Married couples filing separately: $13,850, a $900 increase from 2022.
- Single taxpayers: $13,850, a $900 increase from 2022.
- Heads of household: $20,800, a $1,400 increase from 2022.
For taxpayers who are 65 or above, blind, or both, the standard deduction is higher. The additional amount for individuals belonging to the mentioned categories is as follows:
- $1,750 for single filers and heads of household, and
- $1,350 for married filers
IRS Deduction Guidelines
Remember that IRS has specific guidelines and rules for claiming deductions on your taxable income and it is the same with standard deductions as well. Below are some of the significant pointers you must not forget:
- You can apply for itemized deductions if it provides you lower tax liability than standard deductions. Itemized deductions include expenses such as mortgage interest, state and local taxes, charitable contributions, medical expenses, etc. However, some of these deductions are subject to limitations and thresholds.
- You can either claim standard deduction or itemized deductions but not both on the same tax return. You have to choose one of the two.
- If you are married and filing taxes separately, you cannot choose different methods. In case, your spouse has chosen itemized deduction, you need to itemize your deductions as well. You cannot claim for standardized deductions.
- You are, by default, not eligible for standard deduction If you are a nonresident alien, a dual-status alien, or a person who files a return for a period of less than 12 months due to a change in your annual accounting period.
- You can still claim the standard deduction with no income or income below the filing threshold. (However, you may not need to file taxes AT ALL if your income is below the threshold; meaning by no other filings are required too).
These are some of the major changes that affect the standard deduction for tax year 2023. Hope this blog has helped you stay up to date with the latest tax developments. Plan your taxes accordingly. Also, know how to smoothly navigate through the tax season for a better experience.
Written by – Priyanka Rampal
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