The standard deduction for the 2023 tax year witnesses a significant rise of approximately 7% due to the elevated inflation observed in 2022. Consequently, single filers can expect an increase of $900, while those who are married and filing jointly will witness a rise of $1,800 in their standard deduction.
The IRS offers two options for reducing your taxable income: taking the standard deduction or itemizing. While most taxpayers choose the standard deduction due to its simplicity, it may not be the best choice for everyone.
The standard deduction is a fixed amount that the IRS allows you to deduct from your adjusted gross income, thereby lowering the amount of income subject to taxation. The amount of the standard deduction you are eligible for is typically determined by your tax-filing status. Some taxpayers, such as those who are disabled or over the age of 65, may be entitled to a higher standard deduction, known as an additional standard deduction. Conversely, if you can be claimed as a dependent, your standard deduction may be lower. In most cases, the IRS allows taxpayers to claim the standard deduction without any additional standard deduction without any additional requirements, even if they have no other qualifying deductions or tax credits. However, there are certain situations that may disqualify some taxpayers from claiming it.
For example, a married couple filing jointly with an AGI (adjusted gross income) of $125,000 in 2023 would be entitled to a standard deduction of $27,700, reducing their taxable income to $97,300.
How does standard deduction work
You have the option to either opt for the standard deduction or choose to itemize on your tax return. The standard deduction is a fixed amount that can be subtracted from your Adjusted Gross Income (AGI) without the need for any proof to be provided to the IRS. On the other hand, itemized deductions work differently by allowing you to reduce your taxable income through individual expenses that are approved by the IRS.
These itemized deductions encompass various expenses such as property taxes, specific medical costs that are not reimbursed, or even business mileage. By taking the standard deduction, you forfeit the ability to deduct home mortgage interest or certain types of tax benefits. However, if you decide to itemize, it is advisable to retain records that support your deductions in the event of an IRS audit.
Standard deductions for taxes due April 2024
The standard deduction for the year 2023 is $13,850 for individuals filing as single or married filing separately, $27,700 for couples filing jointly, and $20,800 for individuals filing as heads of household.
People who have reached the age of 65 or above, as well as individuals who meet the IRS definition of blindness, are entitled to an extra amount for their standard deduction. This additional deduction can be added to their existing base standard deduction. The specific amount of this extra deduction depends on their filing status and the applicable conditions. To be eligible for the age based additional standard deduction, it is necessary to have turned 65 by the end of the tax year.
To qualify for the additional standard deduction for blindness, the IRS requires individuals to either be completely blind or have received a statement from an eye doctor confirming that their better-functioning eye has a visual acuity of less than 20/200 or their field of vision is limited to 20 degrees or less. It is also possible to qualify for this deduction if contact lenses can correct the conditions, but the individual is unable to wear them due to pain or infection.
When can I not take standard deduction?
The standard deduction is generally a beneficial tax benefit for many individuals, although there are certain circumstances where eligibility may be restricted.
In the event that you are married and choose to file separately, and your spouse opts to itemize deductions, you will also be required to itemize your deductions accordingly. If you are filing a tax return as a trust, estate, or partnership, the standard deduction may not be applicable in your case. Furthermore, if your tax return covers a period of less than a year due to changes in your accounting period, the standard deduction may not be available to you. Lastly, if you are classified as a “nonresident alien” or a “dual-status alien” of the United States, there are exceptions to consider.
Key Takeaway
Consider itemizing your deductions if they exceed your standard deduction to save money. However, if your itemized deductions are less than your standard deduction, it may be more efficient to take the standard deduction and save time.
