The standard deduction train picked up even more passengers after the Tax Cuts and Jobs Act (TCJA) of 2017 essentially doubled the standard amounts.
And those now more valuable deduction amounts are getting even better, thanks to the recent, and historic, inflation rate.
Increased standard deductions: About this time each year, the IRS announces how inflation will affect certain tax laws in the coming year. It did so this week for an expansive array (60+) of tax provisions, including today’s Part 2 of the ol’ blog’s annual inflation series that looks at deductions (and more).
For filers who claim the standard deduction in tax year 2023, those amounts for most taxpayers younger than 65 are:
- $13,850 for single taxpayers and married taxpayers filing separate returns, $900 more than 2022’s $12,950
- $20,800 for heads of household, a bump of $1,400 from this year’s $19,400; and
- $27,700 for married filing jointly couples and surviving spouses, up $1,800 from $25,900 the 2022 tax year.
At the risk of being repetitive (and because I like tables), below is a comparison of this year’s 2022 deduction amounts and those that will be available in 2023. Again, note the dates, i.e., tax years, to which these amounts apply.
Use these amounts
to file 2022 taxes in 2023
Use these amounts
to file 2023 taxes in 2024
|Head of Household||$19,400||$20,800|
|Married Filing Jointly||$25,900||$27,700|
|Qualifying Widow or Widower (Surviving Spouse)||$25,900||$27,700|
|Married Filing Separately||$12,950||$13,850|
Age adds to deductions: I know my tax-savvy readers caught my earlier reference to “most taxpayers younger than 65” when it comes to standard deduction amounts.
The age distinction is important because the tax code allows older filers and those who are visually impaired to claim additional standard deduction amounts. And you can do so simply by ticking a checkbox on your tax return.
Each added standard deduction amount option is separate for each filer, meaning that an older married couple could check up to four boxes on their joint return. The total number of boxes checked then is used to determine the filer(s) standard deduction amount.
For the 2023 tax year, filers age 65 or older and/or legally blind taxpayers get an additional standard deduction amount. It will be $1,500 for each qualifying circumstance. That’s $100 more than the $1,400 allowed on 2022 returns.
The additional standard deduction amount in age/vision situations is increased next year to $1,850 if the taxpayer also is unmarried and not a surviving spouse. Again, that’s $100 more than 2022’s $1,750 addition.
And if you’re a tax filer who also can be claimed as a dependent on another filer’s tax return, in 2023 your standard deduction amount cannot be more than the greater of either $1,250 or the sum of $400 and the dependent filer’s earned income.
On 2022 returns, a dependent’s standard deduction amount cannot be more than the greater of either $1,150 or the total of $400 plus your earned income.
Itemized deduction issues: A key component of annual tax planning is determining whether you’d be better off claiming the standard deduction or itemizing all your allowable tax expenses on Schedule A.
The TCJA changes made the standard deduction choice a no-brainer for tens of thousands or filers. But not all.
And don’t just assume that taking the standard route is the best tax deduction map to follow. You know that old tax saying: Assuming can get your a$$ kicked by the IRS in the form of a higher tax bill.
OK, maybe that’s just my personal old tax saying, but you get the idea. Double check your deduction choice so that you don’t cheat yourself at filing time.
Basically, and even the IRS says this, you always want to use the deduction method that gives you the larger amount to offset your income. You’re not locked into any one way. It’s a decision you make each tax year. One year, itemizing might be better. The next year, it’s wise to take the standard deduction.
Knowing what’s available on the standard side gives you a baseline to use in measuring your potential itemized expenses.
For some folks, even under the new tax law, their total itemized deduction amount will still be more than their standard deduction amount. In these cases, by all means itemize.
While the $10,000 federal itemized deduction cap on state and local taxes (SALT) is still in place, other items could make filling out a Schedule A worthwhile.
In addition to SALT claims, many medical expenses remain deductible as long as they exceed 7.5 percent of your adjusted gross income (AGI). You can find more claim opportunities in my post on maximizing itemized deductions, as well as the one on bunching tax-deductible expenses.
Exemptions, sorta, still around: The personal exemptions, a once-popular tax reduction option that was eliminated by the TCJA through 2025, still is off the tax books.
Exemptions were a specific dollar amount, adjusted annually for inflation, that taxpayers could claim for themselves, their spouses if filing jointly and dependents. The total exemptions helped reduce the amount of filers’ income subject to tax.
TCJA supporters say the exemption elimination isn’t a big deal, although some filers with larger families disagree. The exemption loss is offset, they argue, by the previously discussed larger standard deduction amounts, as well as tax reform’s larger child tax credit (it was further enhanced for the 2021 tax year to help offset COVID-19 pandemic financial problems, but reverted to its $2,000 level in 2022) and the credit for other, non-child dependents.
Sometimes, though, tax laws use the personal exemption amount to calculate whether a filer can claim another tax benefit and/or how much of such a tax break. Doing away with the personal exemption amount would effectively invalidate those tax laws.
But that wasn’t the intent of the TCJA’s exemption erasure. So the IRS continues to calculate the now officially zero exemption amount based on pre-2017 exemption data.
A common situation where the exemption amount matters is when a taxpayer wants to claim a tax break for a qualifying relative. For the 2023 tax year, the IRS’ so-called deemed exemption amount, based on a gross income limitation, is $4,700. That’s $300 more than the $4,400 exemption in 2022.
More inflation info on the way: Well, this second part of the annual inflation series has turned into a numbers-heavy post for a tax deduction that’s supposed to be simple and easy. But ain’t that the way so often when it comes to taxes?
I’ll give you some time to sort through this. Then I’ll continue breaking out and down more 2023 inflation adjustments in the coming days.
As the box below indicates, you can find a directory to all 10 parts in the first post of the series. Thanks for reading this one and all the rest.
And thanks especially for your tax inflation interest and explanation patience!
|This post on 2023 standard and itemized tax deductions|
is Part 2 of the ol’ blog’s annual series on tax inflation adjustments.
The 10-part series started with a look at next year’s
income tax brackets and rates.
That first item also has a directory, at the end of the post,
of all of the posted and upcoming tax-related inflation updates for 2023.
Note: The 2023 figures in this post apply to that tax year’s returns to be filed in 2024.
For comparison purposes, you’ll also find 2022 amounts that apply
to this year’s 2022 taxes that will be due April 18, 2023.