Standard Deduction

What Is A Standard Deduction?

The standard deduction is deducted from a taxpayer's adjusted gross income and is below the line (AGI). Taxpayers often have two choices: claim the standard deduction or itemize deductions.

Taxpayers should adopt the technique that yields the largest number of deductions, whether they itemize deductions or take the standard deduction, as deductions lower taxable income.

Itemized Deductions

The amount you actually spent on some deductible items, including medical costs, state and local taxes, mortgage interest, and charity deductions, is what is known as an "itemized deduction." If you want to itemize, you must include Schedule A with your tax return and identify all of these costs on it.

Because you don't need to keep track of your expenses or keep track of supporting paperwork like bank statements, medical bills, and tax forms, taking the standard deduction is simpler.

Some Of The Most Frequently Used Itemized Deductions

Mortgage expense, which can include both mortgage interest and mortgage insurance payments.

Other taxes - State and local taxes, including real estate taxes on personal property, may be deductible.

Gifts to charity - If an individual can itemize, he may write off donations to a church as well as the fair market value of the extra TV you gave to the animal shelter's resale shop.

Medical and dental costs - If unreimbursed costs exceed a specific percentage of an individual's income, he may be allowed to deduct them.

Standard Deduction Amount

The following elements affect how much the standard deduction is each year:

In general, the standard deduction rises yearly to account for the impacts of inflation.

The tax year, not the filing year, is when the standard deduction is applied.

Filing status

2022 

2023 

Single

$12,950.

$13,850.

Married and filing jointly

$25,900.

$27,700.

Married, filing separately

$12,950.

$13,850.

Head of the family

$19,400.

$20,800.

Who Can Claim The Standard Deduction?

The majority of individual taxpayers are eligible for the standard deduction. They cannot, however, claim the standard deduction if they:

• Are married individuals who are filing separately and whose spouse itemizes their deductions?
• Are filing as a trust, common trust fund, partnership, or estate throughout the year; 
• Have a nonresident or dual-status alien status for the whole year. 
• They must submit a return for a period of fewer than 12 months if their annual accounting period is changing.
• Anyone who doesn't itemize their actual deductions is often eligible for the standard deduction (such as medical expenses, charitable contributions, property taxes, etc.).

However, if a married person is filing separately and their spouse itemizes deductions on his or her own return, the individual is not eligible to claim the standard deduction. If they own a business, a change in their yearly accounting period or noncitizen residency requirements may disqualify them from taking the standard deduction in some cases. Additionally, their standard deduction can be restricted if someone else is claiming them on their tax return.

What Benefit Does Using The Standard Deduction Provide?

The standard deduction is fairly straightforward, as well as lower taxable income and maybe tax payer's tax burden. It may be calculated using simple math, and unlike when people itemize deductions, they don't need to complete any additional tax forms to claim it.

Utilizing free internet tax preparation tools makes claiming the standard deduction particularly simple. The program may also assist in deciding which would save you the most money on taxes—the standard deduction or itemizing deductions—through a series of lifestyle-based questions.

How Does The Standard Deduction Work?

The IRS gives the standard deduction without asking any questions, even if people don't have any other allowable deductions or tax credits. The amount of income individuals must pay taxes on is decreased by the standard deduction.

 On his tax return, the taxpayer may either claim the standard deduction or itemize deductions; he may not claim both. In essence, itemized deductions are costs that the IRS permits and which can lower taxable income.

 If he chooses the standard deduction, he will be unable to deduct his house mortgage interest or any of the other widely used tax deductions, such as charitable contributions and medical costs. (However, if he itemizes, he should keep track of the documentation proving his deductions in case the IRS decides to audit him.)

 He receives a smaller standard deduction if a dependent may claim him.

 If a person is over 65 or blind, they will receive an additional $1,400 in the 2022 tax year, and if they are also single and do not have a surviving spouse, they will receive an additional $1,750. For the 2023 tax year, these two extra standard deduction amounts will rise by $100 to $1,500 and $1,850, respectively.

Conclusion

The standard deduction has long been the simpler way to do taxes, particularly for first-time filers or those with few deductible costs. It's a quick and straightforward approach to lower taxable income and perhaps even tax obligation.

The much-increased standard deduction may make itemizing deductions less advantageous for seasoned filers. Unless a person's itemized deductions exceed the standard deduction for their filing status, taking the simpler approach can end up being the better option this tax season.