The standard deduction is an important factor in calculating taxable income for taxpayers. It is one of the “below the line” deductions that taxpayers can claim on their tax returns. In this blog, we will be discussing the standard deduction for tax years 2020 to 2023.
To understand the importance of the standard deduction, let’s take a quick look at the income tax equation. The first half of the equation is essentially an income statement, where income is reduced by expenses or deductions. The adjustments to income (also known as above the line deductions) are then subtracted to arrive at the adjusted gross income (AGI). Finally, the greater of the standard deduction or itemized deductions is subtracted from the AGI to arrive at taxable income.
In 2020, the standard deduction for single filers was $12,400, while married couples filing jointly could claim a standard deduction of $24,800. The standard deduction for head of household was $18,650. These amounts increased slightly in 2021 and will continue to increase in the coming years.
For tax year 2022, the standard deduction for single filers is $12,950, while married couples filing jointly can claim a standard deduction of $25,900. The standard deduction for head of household is $19,400.
It is important to note that taxpayers have the option to claim either the standard deduction or itemized deductions, whichever is greater. Itemized deductions include things like mortgage interest, state and local taxes, charitable contributions, and medical expenses. However, claiming itemized deductions requires more documentation and can be more time-consuming.
Taxpayers who are 65 years or older, or blind, can claim an additional standard deduction. For tax year 2022, the additional standard deduction for each category is $1,700 for single filers and $1,350 for married couples filing jointly.
In conclusion, the standard deduction is an important factor in calculating taxable income for taxpayers. It is a below the line deduction that taxpayers can claim on their tax returns. The standard deduction for tax years 2020 to 2023 has increased slightly and varies depending on filing status. Taxpayers have the option to claim either the standard deduction or itemized deductions, whichever is greater.