If there’s one thing you can bet on when dealing with the Internal Revenue Service (IRS), it’s that you’ll have to pay your taxes every year. Despite this uniformity, the agency may make adjustments from time to time that impact the manner in which you file—and even the amount you owe. The IRS has recently stated that it has increased standard deductions for this year’s filing. Continue reading to find out if you’ll be affected by the change and what it could imply for you.
How to file taxes varies greatly from person to person, depending on their profession, family, and other life circumstances. This includes deductions, which taxpayers may claim for items like charity donations, a home office space, or house mortgage payments to reduce their tax liability in any given year if they qualify.
While some people prefer line item deductions, the IRS also provides a standard deduction. According to the personal finance website NerdWallet, this is an amount determined by the tax agency that you can deduct from your adjusted gross income to reduce what you owe in a filing. This lump sum can eliminate the extra labor and paperwork required for itemized deductions.
While the amount is consistent, it does vary depending on a few factors. Those 65 and older, as well as those who are blind, are generally eligible for a greater standard deduction. According to the IRS, anyone who may be claimed as a dependent on another person’s papers will see a smaller amount.
Choosing the standard deduction also precludes you from making any further itemized deductions in your tax return. And certain populations are barred from claiming them, such as married couples filing jointly with one member electing to itemize deductions or anybody filing on behalf of a trust, partnership, or estate.
While some people’s eligibility for the standard deduction may alter over time, the amount they can claim fluctuates depending on a yearly IRS decision.
“Every year in September, the Bureau of Labor Statistics produces the August consumer price index,” Anthony Burke, an IRS spokesperson, told WTOP. “The IRS takes those figures and applies them to about 60 tax items that have to be, by law, adjusted for inflation. And so, it moves up various rates, various things change, and most of these are beneficial for taxpayers because it has to keep track with inflation to keep things fair.”
And this year is no exception. The IRS stated on Oct. 18 that the standard deduction levels for 2023 have been increased, which means you may be able to take more off when you file next April if you qualify.
According to the IRS, married couples filing jointly can deduct $27,700, an increase of $1,800 over the prior year. Single taxpayers and married couples filing jointly will see a $900 boost to $13,850 from last year. Those filing as the head of a family can now receive $20,800, a $1,400 rise from 2022.
And the changes do not end this year. According to an IRS press statement issued on November 9, the standard deduction will be increased once again for the 2024 tax year.
Standard deductions for married couples filing jointly will increase by $1,500 to $29,200 for files due in April 2025. Single individuals and married couples filing separately would see their tax refund increase by $750 to $14,6000. Those filing as heads of household will see a $1,100 rise for a $21,900 standard deduction.
Along with increasing standard deduction amounts, the IRS also revealed another big change for the 2023 tax year: tax bracket revisions. This indicates that, due to inflation, the agency has shifted the defined limitations for income levels to determine which tax rate they qualify for. According to Forbes, the aggregate modifications increased the top limits by 7% over the 2022 tax year.
Typically, every change in the tax rate attracts a lot of attention, regardless of which direction it’s going. While those figures will remain unchanged until you file again, the IRS has announced a revised set of tax brackets for the 2023 tax year.
The changes influence where the income levels’ limits are defined, with rates increasing steadily as quantities grow. According to Forbes, this year’s revisions account for inflation, with top limits that are 7% higher than those in 2022. While deductions and other factors must still be considered, these brackets might help you estimate how much you’ll pay when it comes time to file.
Because of the change, some people may pay a different rate this year before deductions. The lowest tax rate begins at 10% for individuals with taxable income of $11,000 or less, or $22,000 for married couples filing jointly. It then gradually rises from 12 percent for persons earning between $11,001 and $44,725, 22 percent for those earning between $44,726 and $95,375, and 24 percent for those earning between $95,376 and $182,100.
Individuals earning between $182,101 and $231,250 now have a rate of 32%, while those earning between $231,251 and $578,125 have a rate of 35%. It reaches a peak of 37% in 2023 for individuals earning $578,126 or more. The agency’s website has a comprehensive list of revised brackets and rates, including those for married couples filing jointly or individually.
