IRS Announces Increase in Standard Deduction for 2023 Tax Year: Is it Right for You?

The standard deduction is a fixed monetary amount that is deducted from your taxable income. The standard deduction for the 2022 tax year is $12,950 for single filers, $25,900 for joint filers, and $19,400 for heads of household. In 2023, these amounts will increase to $13,850, $27,700, and $20,800, respectively, according to a data release by NerdWallet on February 2, 2023.

The standard deduction Is taken on a no-questions-asked basis by the IRS, even if you don’t have any other qualifying deductions or tax credits. You can either take the standard deduction or itemize your deductions, but not both. Taking the standard deduction means that you cannot deduct home mortgage interest or any other popular deductions, like medical expenses or charitable donations.

If you can be claimed as a dependent by someone else, your standard deduction will be reduced. According to a Kiplinger report on February 3, 2023, there will be increased standard deduction amounts for individuals over 65 or blind, which will increase for the 2023 tax year.

It is worth checking if itemizing your deductions would save you money, particularly if you have a mortgage or home equity loan. You can compare your mortgage interest deduction amount to the standard deduction and consider other deductions such as property taxes, state income taxes, or charitable donations.

If your standard deduction is less than your itemized deductions, you should itemize to save money. On the other hand, if your standard deduction is more than your itemized deductions, it may be worth taking the standard deduction to save time. Tax software or a tax professional can help determine which method will result in a lower tax bill.