FEDERAL INCOME TAX BRACKETS 2021 VS 2022 SOFTWARE
If you’re using a commercial tax software product like TurboTax or H&R Block to file your federal income taxes, the program will automatically include the standard deduction on your return-unless, of course, you itemize your deductions. If the higher amount isn’t extended by Congress, the pre-2018 standard deductions will apply once again (as adjusted for inflation) beginning in 2026. YATI Tax Tip: The Tax Cuts and Jobs Act of 2017 nearly doubled the standard deduction from 2018 through 2025. And with the recent surge in inflation rates, the standard deduction amounts jumped considerably more from 2022 to 2023 than what we’re used to seeing. Standard deductions are different from year to year because the IRS adjusts them annually to account for inflation. We’ll also provide the 2022 standard deduction amounts for comparison’s sake and for people who haven’t yet filed their 2022 return (e.g., because they got a tax filing extension ). Now that you understand the importance of the standard deduction, let’s take a look at the actual standard deduction amounts for the 2023 tax year. Related: Education Tax Credits and Deductions for 2023 And if your standard tax deduction is large enough to bring your taxable income down to a lower tax bracket, the impact can be even greater. The lower your taxable income, the lower your tax bill. The higher your standard deduction (or itemized deductions), the lower your taxable income. If you can claim any tax credits or made previous tax payments, they are subtracted from the tax due. (Small business owners and certain other people might also be allowed to deduct up to 20% of their qualified business income.) Once you know your taxable income, calculate the tax due for that dollar amount. The next step is to subtract either your standard deduction or itemized deductions from your adjusted gross income to arrive at your taxable income. That figure includes all your taxable income, minus any “above-the-line” tax deductions you’re entitled to claim (i.e., deductions taken from your gross income to arrive at your adjusted gross income). When working on your income taxes, the first thing you need to do is calculate your federal adjusted gross income, or AGI.
Once you read through the information below, you should be ready to make that call. We’ll also help with the standard deduction vs. We’ll break it down so you can easily determine your standard deduction amount for the 2023 tax year-and compare it to your 2022 standard deduction. Sound confusing? It’s really not as complicated as it seems. There’s a special rule for people impacted by certain natural disasters that can increase your standard deduction, too. The standard deduction amount that applies to you primarily depends on your filing status, but it can also be impacted by your age, whether or not you’re a dependent, and even your vision. So, it’s wise to consider both the standard deduction and itemized deductions before making your final decision.īut, of course, you can’t make that decision until you know what your standard deduction will be for that particular tax year. For many people, itemizing deductions lowers their taxable income and cuts their tax bill considerably more than the standard deduction. Although most taxpayers choose the standard deduction, it really depends on your own circumstances. You can’t do both-you have to pick just one.įortunately, you can select the option that works best for you.
Each year when it’s time to file your federal income tax return, you must make an important decision: Claim the standard deduction or itemize.
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