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- The standard deduction reduces the amount of your income subject to federal tax.
- The standard deduction amount changes regularly to adjust for inflation.
- You can choose to take the standard deduction or itemize your deductions, whichever is higher.
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Tax deductions allow you to reduce the amount of income you pay tax on when you file your return. Federal taxes statement with the Internal Revenue Service. The standard deduction is the one available to most taxpayers.
Although the exact amount of the IRS standard deduction changes each year, it has offered at least a $12,000 to $24,000 reduction in taxable income per taxpayer since 2018, when the Tax Cuts and Jobs Act went into effect.
What is the standard deduction?
The standard deduction allows you to reduce your taxable income by a fixed dollar amount, depending on your tax filing status. If you file as a single person, you will get a smaller deduction than a person filing as head of household or a married couple filing jointly.
“There are special cases where the standard deduction may be higher for certain taxpayers,” says Armine Alajian, a certified public accountant and founder of the Alajian Group In Los Angeles. “If you’re over 65 or blind, you can get an extra amount added to your standard deduction.”
Here’s a simple example of what the standard deduction looks like in action: If you have gross income of $80,000 and file as a single person, are under age 65, and are not blind, you would be eligible for a standard deduction of $12,950 on your 2022 Tax Return. This would mean you would only pay tax on $67,050 of income, assuming no other deductions above the line.
Standard deduction: 2022 and 2023
The amount of the standard deduction is adjusted each year to account for inflation. It has increased steadily since the standard deduction was introduced in 1970.
In 2023, it picks up again, jumping around 7% from its 2022 levels.
Extra amounts for people over 65 and blind
If you are over 65 or blind, you are eligible for an additional standard deduction of $1,500 to $1,850, depending on your filing status. If you are elderly and blind, this amount is doubled.
How the standard deduction works
When you file your federal tax return, you can choose to use the standard deduction or itemize your deductions, whichever is higher.
“All taxpayers automatically get the standard deduction,” Alajian says. “Some people who have certain expenses that fall into the category of itemized deductions, such as excess health care expenses, mortgage interest, property taxes and charitable deductions, may choose to itemize their deductions.”
Who qualifies for the standard deduction?
Most taxpayers are eligible for the standard deduction. However, if you choose to itemize your deductions, you will also not be able to claim the standard deduction.
In addition to this, you may not be eligible for the standard deduction if:
- You and your spouse file separate returns, and your spouse items your deductions.
- Filed as an estate, trust, common trust fund, or partnership.
- File a return for less than 12 months due to a change in your account period.
- You are a nonresident alien or dual status alien during the tax year.
There are exceptions to the nonresident alien ruleso be sure to check with the IRS if this applies to you.
The standard deduction for tax year 2022, which is the tax return you file in the spring of 2023, is $12,950 for single taxpayers and married couples filing separately, $19,400 for head-of-household taxpayers, and $25,900 for married couples filing separate returns. file joint returns.
The standard deduction for tax year 2023 is $13,850 for single filers and married couples filing separately, $20,800 for heads of household filing and $27,700 for married couples filing jointly.
If your income is less than the standard deduction, then you do not have to file a federal return. tax return. However, he may still want to claim a refund of the taxes he paid during the year or claim refundable tax credits, such as the earned income tax credit.
You must take the standard deduction if it is more than your total deductions per item would. If the total of your itemized deductions is higher, you must claim those deductions instead. Talk to a tax professional if you’re not sure which strategy is best for your situation.