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Although taxpayers can take an unlimited number of deductions on their tax returns, the vast majority of Americans use the standard deduction. Standard deductions are preset deductions you can use without itemizing or documenting individual line items. For 2023, the IRS has increased standard deductions due to inflation. Find out how new deductions will affect you and your taxes.
What Is the Standard Deduction for 2023 vs. 2022?
The IRS increased standard deductions by about 7% across the board for the 2023 tax year. Although the IRS regularly adjusts the standard deduction amounts according to the cost of living, this year's adjustments were particularly large due to unusually high inflation in 2022. Keep in mind that the increased standard deduction won't affect your taxes until you file in 2024.
| Standard Deductions for 2023 | |||||
|---|---|---|---|---|---|
| Single and Married Filing Separately | Head of Household | Married Filing Jointly | |||
| 2022 | 2023 | 2022 | 2023 | 2022 | 2023 |
| 12,950 | 13,850 | 19,400 | 20,800 | 25,900 | 27,700 |
Source: IRS
How the Standard Deduction Works
The standard deduction is a set amount of money every taxpayer is entitled to exclude from their taxable income. The standard deduction varies by your filing status: single, head of household, married filing jointly or married filing separately.
If you claim the standard deduction, you can't claim individual itemized deductions like mortgage interest or charity donations that you list out and subtract from your taxable income. In that way, standard deductions are limited: You can only deduct the prescribed amount.
But standard deductions also make filing your taxes much simpler and easier. Standard deductions don't require any calculations or documentation; you just find your deduction by filing status and plug it in.
Standard deductions are relatively generous and are useful if you don't have large deductions to claim. It effectively makes a portion of your income tax-free: A $27,700 standard deduction for married couples filing jointly means the first $27,700 a couple earns doesn't count as taxable income.
How Much Can I Save With the 2023 Standard Deduction?
The standard deduction is increasing by $900 for single filers and married couples who file separately; $1,400 for heads of household; and $1,800 for married couples filing jointly. How much this adjustment saves you in dollars and cents depends on your tax bracket.
Estimating your taxable income in advance is an inexact science. But you can ballpark your 2023 taxable income by using information from your most recent tax return, or by subtracting the new standard deduction from your expected adjusted gross income. Find the tax bracket that contains your estimated taxable income and look for your possible tax savings in the column to the right.
| Potential Savings for Single Filers in 2023 | ||
|---|---|---|
| Rate | Tax Bracket | Potential Tax Savings |
| 10% | $0 - $11,000 | $90 |
| 12% | $11,001 - $44,725 | $108 |
| 22% | $44,726 - $95,375 | $198 |
| 24% | $95,376 - $182,100 | $216 |
| 32% | $182,101 - $231,250 | $288 |
| 35% | $231,251 - $578,125 | $315 |
| 37% | $578,126 or more | $333 |
| Potential Savings for Married Couples in 2023 | ||
|---|---|---|
| Rate | Tax Bracket | Potential Tax Savings |
| 10% | $0 - $22,000 | $180 |
| 12% | $22,001 - $89,450 | $216 |
| 22% | $89,451 - $190,750 | $396 |
| 24% | $190,751 - $364,200 | $432 |
| 32% | $364,201 - $462,500 | $576 |
| 35% | $462,501 - $693,750 | $630 |
| 37% | $693,751 or more | $666 |
The potential tax savings shown in these charts is for illustration purposes only. Your results may vary.
As an example, a married couple with $115,000 in taxable income might see $396 in tax savings from 2022 to 2023, assuming their tax bracket stayed the same. If your taxable income is near the dividing point between two tax brackets, your savings will likely fall somewhere between the tax savings amounts for the two closest brackets.
Should I Itemize Deductions?
You should consider itemizing if your total itemized deductions might exceed the standard deduction. As a single taxpayer, your standard deduction for 2023 is $13,850. Common itemized deductions that might take you over the $13,850 threshold include:
- Mortgage interest: You can deduct interest on a mortgage of up to $750,000 if you itemize your deductions.
- Medical and health care expenses: Only unreimbursed expenses that exceed 7.5% of your adjusted gross income are deductible. If your adjustable gross income is $100,000 and you have $20,000 in qualifying medical expenses, for example, you can deduct $12,500 ($20,000 - $7,500).
- State and local taxes: State and local taxes, including property tax, state income taxes and vehicle registration fees, are deductible up to $10,000.
- Charity donations: You may deduct charitable contributions of up to 60% of your adjusted gross income if you itemize deductions on your tax return. You may deduct up to 100% of your adjusted gross income if a charitable contribution is considered qualified by the IRS.
While it's possible to rack up enough itemized deductions to exceed the standard deduction, many taxpayers don't. Married taxpayers who file jointly have a standard deduction of $25,900 in 2022. Getting over that threshold is likely to require multiple large deductions. When the standard deduction goes up in 2023, it will be even harder to find enough itemized deductions to beat it.
Ultimately, the increased standard deduction is a good thing for most people. The majority of taxpayers choose the standard deduction over itemizing because it can be difficult to come up with more itemized deductions than the standard deduction allows. And if you claim the standard deduction, you don't need to explain or document your deduction, which can make filing your taxes much simpler.
The Bottom Line
New standard deductions start in 2023, which means they won't affect your taxes until you file in 2024. Still, the increase in standard deductions may save you a few dollars on your taxes and more accurately reflect the cost of living following recent months of inflation.