Your standard deduction is the portion of your income that is not subject to tax that can also be used to reduce your tax bill. You are allowed to take the standard deduction if you elect not to itemize your deductions whenever you are calculating your taxable income. Your standard deduction amount is based on your age, filing status, if you are dependent on someone else's tax return, and if you are disabled. If you are 65 or older, you can also claim a higher standard deduction.
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Standard vs. Itemized Deductions
The benefit of using the standard deduction as opposed to itemized deductions is that you do not have to keep track of all your qualifying expenses, making tax planning much less strenuous. Furthermore, the standard deduction amount is often greater than what their deduction would be if they did add up all of their individual tax deductions.
After the Tax Cuts and Jobs Act was passed, it severely reduced the state and local deductions as well as the mortgage interest deduction for any properties bought after December 15th, 2017, making the standard deduction a much more attractive option.
Regardless of which you decide is better for your situation, you can only choose one. So weigh your options carefully to ensure you make the right financial decision for your tax plan. However, for the lion’s share of taxpayers, they will be able to deduct more by taking the standard deduction, as well as saving themselves vast amounts of time trying to keep track of each individual qualifying expense.
What is the Standard Deduction for 2023?
The standard deduction rates increased from the 2022 rates. They readjust each year to keep up with inflation, so although 2024 seems a long way off, be sure to keep an eye out each year for changes in the standard deduction amount. The IRS increased standard deductions across the board by roughly 7% in 2023. This unusually high amount was in response to the record high inflation numbers that we saw in 2022. For 2023, the new higher standard deduction rates are:
For single or married but filing separately taxpayers, it is $13,850. For those married and filing jointly and qualifying widowers, the amount is $27,700. Heads of households may deduct up to $20,800.
Take Advantage of the Higher Deduction if you are 65 or Older
For taxpayers who are at least 65 years old or older at the end of the tax year, they can claim a higher deduction. There is an additional standard deduction of $1,500 that is allowed for 2023. If you are claiming either single or head of household filing status, this additional amount is increased even more, to $1,850. If you will be at least age 65 by the end of this tax year, be sure to take advantage of this additional deduction. There is no need to pay more to Uncle Sam than you have to.
As with all standard deductions, if you are 65 or older and blind, your additional deduction amount is doubled.
Your Taxes are Probably Less Complicated than you Think
Tax planning can be a daunting prospect, and it is one of the most crucial aspects of financial planning. However, as people often do, you probably are overestimating the complexity of your taxes. Although the complexities can certainly become intricate, coming up with a comprehensive tax plan is the first step. You may consider consulting a certified financial planner whose services include both tax planning and investment management.
Though it may seem intimidating, there are plenty of tax planning services available in Greenville, South Carolina that can help lighten the load for you and provide clarity to any tax-related issues that you may have. While tax management services may be your primary concern, don’t forget that tax planning is just one aspect that comprises your overall financial plan.
Take advantage of the wide list of advisory services that we have to offer at Global View, from tax management and financial planning to retirement planning and estate planning services. Tax planning is something that you will need in all areas of your financial plan, and shouldn’t be taken lightly. Contact one of our financial advisors in Greenville, SC, to learn more about how we can help you with your tax planning and other comprehensive financial planning today.