All About the Standard Deduction in 2023

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Most taxpayers know that deductions allow you to take out certain expenses from taxable income. This lowers the tax burden. There are two types of deductions: standard deductions and itemized deductions. You can only choose one and cannot itemize deductions and use the standard deduction in the same tax year.

The standard deduction is about to change for the tax year 2023. So, knowing if it’s more advantageous to take the standard deduction rather than itemizing is important. But what and how much is the standard deduction in tax years 2022 and 2023?

How Standard Deduction Works

The standard deduction ensures that not all your income is handed over to Uncle Sam. Taxpayers can either claim the standard deduction or itemize their expenses. Both ways lower your tax liability.

The standard deduction is a flat amount that comes off the top, while itemizing is listing your deductible expenses and taking those off your income. The main difference is that you don’t need to justify the standard deduction. The standard deduction is a “no questions asked” deduction.

A standard deduction is one set amount. But it may have additional deductions amounts based on age or blindness.

Standard Deduction Determined by Inflation

Inflation is at a 40-year high. And although it may be costing more at the grocery store, inflation may help you on your taxes.

Inflation running high affects taxes. It influences the value of deductions and federal tax credits. To account for inflation, the standard deduction is adjusted. So, if you don’t itemize, using the standard deduction might help reduce your taxes.

Standard Deduction Amount in 2022

Depending on your filing status, the standard deduction is worth thousands. In 2022, it’s $12,950 for single filers and $25,900 for spouses that filed jointly. The head of household deduction is $19,400.

In 2022, taxpayers at least 65 years old can claim an additional $1,400—that amount is raised to $1,750 for head of household filing status. The additional deduction doubles if you’re married and filing jointly or blind.

Standard Deduction Amount in 2023

The standard deduction will increase by $900 for the tax year 2023. Since the greater the deductions, the lower the taxes, this is good news for taxpayers.

For 2023, single filers are going to receive a $13,850 standard deduction. Married and filing jointly taxpayers will have a $27,700 standard deduction. And the standard deduction for head of household will be $20,800.

And those who are at least 65 years old or blind will receive an additional standard deduction of $1,500. And, of course, as in 2022, if you are 65 and blind, the additional 2023 standard deduction doubles.

When Is Standard Deduction Not Used?

A standard deduction isn’t always possible, nor does it always make sense. The Internal Revenue Service (IRS) doesn’t allow using a standard deduction under certain circumstances.

For example, a married individual filing separately as married cannot claim the standard deduction if their spouse itemizes.

A taxpayer who files a tax return for “a period of less than 12 months because of a change in their annual accounting period” is not eligible for the standard deduction according to the IRS.

Any taxpayer who is a nonresident alien or a dual-resident alien during the year cannot use the standard deduction. But a nonresident alien who is married to a U.S. citizen can take the standard deduction.

You may not want to take a standard deduction if your itemized deductions exceed the standard deduction amount.

Reasons to Take Standard Deduction

Because you must choose between taking itemized deductions or the standard deduction, it’s good to know the difference between them. So what are the different reasons to use them?

A standard deduction is a flat-rate way to lower your taxable income. If you are eligible, you just take it and don’t have to justify it. The standard deduction works well for those without qualified expenses.

You have an even bigger standard deduction if you’re over 65 or blind. And if you’re healthy without many medical expenses to deduct or a mortgage, the bigger standard deduction might be worth it.

But because it’s a flat rate, you are limited, and you need to consider that.

Reasons to Itemize Deductions

Itemized deductions are expenses that you can use to lower your taxable income. For example, consider itemizing if you have a mortgage, high medical bills, losses from a federally declared disaster, large charitable contributions, or other expenses.

Your itemized deductions may be worth more than the standard deduction. It’s worth the time to check. If you have a mortgage start, there. Use the numbers you find on IRS Form 1098 that you receive from your mortgage company. Compare those numbers and any other expenses to the standard deduction. You may have a reason to forgo the standard deduction.

Should You Claim Standard Deduction?

It’s advisable to sit down with your accountant and run the numbers. Yes, the standard deduction is increasing next year, but will you receive more than if you itemized?

The good news is you have the time to plan.

The Epoch Times Copyright © 2022 The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.