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The 2023 Standard Deduction: What it is or Should You Itemize Deductions

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2023 Standard Deduction on Your Form 1040 Tax Return: Should You Itemize Deductions or Take the Standard Deduction Amount?

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The 2023 tax season is upon us, and one of the most pressing questions taxpayers face is whether to itemize deductions or take the standard amount. This article delves into the intricacies of both options, comparing the deduction amounts for 2022 and 2023, and providing insights into how each choice could affect your tax return. Read on to make an informed decision that could save you money on your tax bill.

What is the Standard Deduction Amount for 2023?

The deduction amount for 2023 varies based on your filing status. For single filers, the amount is $12,950, while for those married filing jointly, it's $25,900. The IRS adjusts these amounts annually to account for inflation.

Why is it Important?
Knowing the deduction amount for your filing status helps you decide between itemizing your deductions or taking the standard amount.

How to Claim the Standard Deduction for Your Filing & How Does it Work?

The deduction is a set amount that reduces your gross income. You cannot take this deduction if you itemize your deductions. The Tax Cuts and Jobs Act of 2017 nearly doubled the deduction amounts, making it a more attractive option for many taxpayers.

How it Affects Your Tax Bill
By reducing your taxable income, this deduction directly lowers your federal income taxes. It simplifies the tax filing process, eliminating the need for detailed record-keeping required for itemized deductions.

Should You Itemize Your Deductions Get the Standard Deduction?

The choice between claiming the deduction or itemizing your deductions largely depends on the amount of itemized deductions you can claim. If your itemized deductions are less than the standard amount for your filing status, it makes sense to take the standard amount.

Factors to Consider
Your marital status, age, and whether you have dependents can all affect whether you should itemize or take the standard amount. Additionally, certain life events like home buying might make itemizing more beneficial.

What Was the Standard Deduction for 2022?

For tax year 2022, the standard amount for single filers and married filing separately was $12,550; for those filing jointly, it was $25,100. These amounts serve as a baseline for understanding how the standard amount has been adjusted for inflation in 2023 and how it factors into your adjusted gross income and, ultimately, federal taxes.

Why it Matters?
Understanding the changes in the standard amount amounts year-over-year can help you plan for future tax years.

What Are Itemized Deductions and How Do They Work?

Itemized deductions are specific expenses that the IRS allows you to subtract from your taxable income. Common itemized deductions include mortgage interest. state taxes, local taxes, and charitable contributions. To itemize deductions, you must complete Schedule A when filing your tax return.

Why Itemize Deductions?

If your itemized deductions are higher than the standard amount, you'll likely benefit from itemizing. However, itemizing requires meticulous record-keeping and may expose you to a higher risk of IRS audits.

How Do Other Deductions Factor In?

Additional deductions are available for people older than 65 or over or blind. These additional amounts are added to the basic standard amount.

Who Qualifies?
If you are age 65 or over, or you are legally blind, you can claim an additional deduction. The amount varies based on your filing status.

What About State and Local Tax Deductions?

State and local tax deductions are one of the itemized deductions that taxpayers can claim. However, the Tax Cuts and Jobs Act limited this deduction to $10,000.

Is it Worth It? 
This deduction could be significant if you live in a high-tax state, but you'll need to weigh it against the standard amount to see if itemizing is more beneficial.

Are There Special Rules for the Additional Standard Deduction for People 65 or Older?

Taxpayers who are 65 or over can claim an additional standard amount. The IRS provides this benefit to ease the tax burden on older Americans.

How Much is the Supplemental Deduction for those over 65?
The additional standard amount for people 65 or over varies based on filing status. For 2023, it is $1,350 for single or head-of-household filers and $1,700 for married individuals filing jointly.

How to Calculate Your Standard and Itemized Deduction?

Calculating your standard amount involves considering your filing status, age, and whether you're blind. The IRS provides tax tables to help you determine the correct amount.

Tools and Resources
The IRS offers an online calculator to help you decide whether to itemize or take the standard amount. This tool considers various factors, including age, income, and filing status.

To calculate your itemized deductions, take all of your deductions and add them up.  Itemized deductions can include mortgage interest, daycare expenses, interest incurred for investments, losses on investments, etc.

What's the Difference Between Standard and Itemized Deductions?

The main difference is flexibility. Itemized deductions allow you to claim specific expenses, while the standard amount is fixed based on your filing status.

Which is Better?
Neither is inherently better; it depends on your circumstances. However, the standard amount is simpler and requires less documentation, while itemizing offers the potential for greater tax savings if you have significant deductible expenses.

Key Takeaways

  • Standard Deduction Basics: The standard deduction is a fixed amount that reduces your taxable income. It varies based on your tax filing status—single, married filing separately, or another status.
  • Age and Additional Deductions: Taxpayers aged 65 or older, or blind, can claim an additional standard deduction. This provides a higher standard deduction for eligible individuals.
  • Deduction for Dependents: The standard deduction for dependents is limited and calculated differently, often less than the basic standard deduction.
  • Itemized vs. Standard Deduction: Taxpayers can opt for the standard or itemized deductions. Common itemized deductions include mortgage interest and charitable contributions. If the total itemized deductions are higher than the standard deduction, itemizing may be more beneficial.
  • Determining Which Deduction to Use: To decide whether to use the standard deduction or itemized deductions, compare the amount of itemized deductions to the standard deduction based on your filing status. The choice should be based on which option most lowers your taxable income.
  • Impact on Taxable Income: The standard deduction reduces your taxable income, possibly resulting in lower taxes owed. It's a set amount, making it easier to calculate than itemized deductions.
  • Eligibility and Restrictions: Not all taxpayers can take the standard deduction. For instance, nonresident aliens and individuals filing married filing separately, where one spouse itemizes, cannot take the standard deduction.
  • Filing Considerations: When filing their federal income taxes, taxpayers must decide whether to take the standard deduction or itemize deductions by the end of the tax year.
  • Earned Income Plus Standard Deduction: For some taxpayers, particularly those with lower incomes, the standard deduction can equal their earned income plus a fixed amount, simplifying their tax calculations.
  • Standard Deduction Work for Different Filings: The standard deduction works depending on whether you are single or married, filing separately. The amounts differ, reflecting these different tax situations.
  • Deduction Even for Dependents: Dependents can still get the standard deduction on their federal income tax, though the amount might differ from the basic standard deduction.
  • Updates to Standard Deduction: The IRS regularly updates the standard deduction to reflect inflation and other economic factors, ensuring it remains relevant and beneficial to taxpayers.
  • Standard Deduction vs. Itemized Deductions: Understanding the difference between standard and itemized deductions is crucial. If your itemized deductions are less than your standard deduction, opting for the standard deduction is generally better.
  • Additional Standard Deduction Amounts: Certain taxpayers, such as those over 65 or those who are blind, are eligible for additional standard deduction amounts, offering them a greater reduction in taxable income.
  • Tax Form and Standard Deduction: When completing your tax form, indicate whether you take the standard deduction or itemized deductions. This choice affects how you calculate your taxable income.
  • Mortgage Interest Deduction and Standard Deduction: Taxpayers who opt to itemize deductions might include the mortgage interest deduction, which can be more beneficial if the total itemized deductions exceed the standard deduction.
  • Higher Standard Deductions for Certain Groups: Higher standard deductions available for specific groups, such as those aged 65 or older, provide an additional tax benefit.
  • Itemize or Take the Standard: Taxpayers must decide annually whether to itemize or take the standard deduction based on their financial situation and changes in the tax law.
  • Calculating Your Standard Deduction: To calculate your standard deduction, consider your filing status, age, and whether you have any additional deductions applicable (e.g., for age or blindness).
  • Cannot Claim or Take Standard Deduction: Certain taxpayers, such as married individuals filing separately where one spouse itemizes, cannot claim the standard deduction.

How can Taxfyle help?

Finding an accountant to file your taxes is a big decision. Luckily, you don't have to handle the search on your own. 

At Taxfyle, we connect individuals and small businesses with licensed, experienced CPAs or EAs in the US. We handle the hard part of finding the right tax professional by matching you with a Pro who has the right experience to meet your unique needs and will handle filing taxes for you.

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Legal Disclaimer

Tickmark, Inc. and its affiliates do not provide legal, tax or accounting advice. The information provided on this website does not, and is not intended to, constitute legal, tax or accounting advice or recommendations. All information prepared on this site is for informational purposes only, and should not be relied on for legal, tax or accounting advice. You should consult your own legal, tax or accounting advisors before engaging in any transaction. The content on this website is provided “as is;” no representations are made that the content is error-free.

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published

November 22, 2023

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Antonio Del Cueto, CPA

Antonio Del Cueto, CPA

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