Taxes can be very challenging because they're very complicated and daunting. It can feel like you pay too much attention to too many things—all at once. Fortunately, the standard deduction is there to simplify things and lessen one's taxable income.
In this article, we will dive into what the standard deduction is, who is eligible for it, and how much it's worth in the federal income tax system this 2023.
The standard deduction is the government's way of conveniently lessening people's taxes. It works by providing a set deductible income per annual accounting period to decrease a payer's taxable income. Standard deduction eliminates the hassle of itemizing deductions annually and gives the lower class more breathing room for taxes.
Age, filing status, and income are the three critical characteristics from your taxpayer's profile that ensure standard deductions are levied fairly by the government. Let’s discuss them one by one.
Age, while not a requirement by the IRS or any related government agencies for tax return filing, can play a role in your standard deductions. For example, being over sixty-five lets taxpayers claim the standard deduction with an additional deduction amount. The same applies to taxpayers who are married and filing jointly, with at least one of them being above sixty-five years old.
Your filing status also affects the standard deduction and whether or not you can use it instead of itemizing deductions. For example, single filers have different standard deductions from married filers, and usually, married filers are given a bigger standard deduction.
Those married filing jointly must decide whether or not to use the standard deduction or lessen their taxable income using itemized deductions instead. For example, if a spouse itemizes deductions, their partner must follow suit. The same goes for the standard deduction.
But this does not mean all married taxpayers are required to file together; taxpayers married filing separately can still file their taxes without following their spouse's preference.
Since the standard deduction decreases your overall taxable income, your earnings play a huge role in determining it. This can be done by subtracting the year's rate of the standard deduction from your income, creating tax exemption, and lowering your overall r income tax.
Using your income also makes using the standard deduction advantageous compared to itemized deductions since the standard deduction is easier. Using your income provides you with a much larger deduction amount than itemizing each qualifying expense.
While age, filing status, and income significantly impact your standard deduction, the rate can still change due to other factors. Here are some characteristics that warrant an increase in standard deduction:
On the other hand, being declared dependent on someone else's federal income tax return reduces one's standard deduction instead of increasing it.
As mentioned in the section about spouses, taxpayers must only use one of the two forms of tax deductions used in a federal tax return for an accounting period: the standard deduction or itemized deductions. But what exactly is the main difference between the two?
|Standard Deduction||Itemized Deduction|
If you choose instead to itemize deductions instead of using the standard deduction, here are some expenses that qualify for tax cuts.
The standard deduction and itemized deductions are essentially the same—they both give people tax cuts and provide them with a fair way of deducting taxes. However, most people tend to gravitate towards using the standard deduction since it usually grants a larger amount, especially after the 2017 Tax Cuts and Job Acts, which inflated the standard deduction and lessened incentives for itemized deductions.
So, in a way, there is no better method of lessening your tax bill. What you can do is calculate your tax bill using both methods and choose the larger amount to ensure you maximize your right to minimize your taxes.
No, the standard deduction rate is not fixed; it changes yearly, as mandated, based on the annual accounting period. What remains the same annually are the qualifications for extra tax deductions, such as differences in filing status and other factors. However, these can change, too, depending again on the tax year.
|Standard Deduction: 2023 Rates|
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