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Inflation has been a pain point for many Americans, hitting their wallets in the form of higher prices for food, gas, rent, and other necessities. But since the IRS accounts for inflation each year when setting its tax rates, higher inflation could actually give you some relief on your tax bill.
Tax brackets and the standard deduction are two tax provisions that the IRS adjusts on an annual basis. The standard deduction increased by 7% in 2023, which was the highest adjustment in IRS history. It made additional inflation adjustments again in 2024, although not by as much; however, the good news is that this should still help you save some money when you file your taxes.
What is the standard deduction?
The standard deduction is a dollar amount that reduces your taxable income. It is also the most common type of tax deduction and is dependent on your filing status. You may also be eligible for an additional standard deduction depending on your age, whether you are claimed as a dependent by another taxpayer, or if you have certain disabilities.
Related: Tax Tip: Has your federal tax bracket changed in 2023?
It’s worth noting that there are certain individuals are not eligible for the standard deduction. They include a married taxpayer filing separately whose spouse is itemizing their deductions, a nonresident alien, an individual who filed taxes less than 12 months previously due to changes in their accounting period, and individuals filing as a trust or an estate.
Example of a standard deduction:
Say your 2023 income is $50,000, and your filing status is single. The standard deduction you can apply is $13, 850, which means you will only have to pay taxes on $36,150 of income.
Why has the standard deduction gone up?
The standard deduction has risen substantially in the past decade. According to the Congressional Budget Office, before 2017, 47 million Americans chose to itemize their deductions, but President Donald Trump’s Tax Cuts and Jobs Act nearly doubled the standardized deduction amount (from $6,350 to $12,000 for single filers) as well as placing restrictions on itemized deductions. In 2018, the number of taxpayers who claimed itemized deductions fell to just 18 million. Today, roughly 90% of Americans choose the standard deduction.
What is the standard deduction for 2023?
For the 2023 tax year, the IRS increased the standard deduction by $900 for single filers and married couples filing separately to $13,850. Married couples filing jointly received an $1,800 increase in their standard deduction, to $27,700. Head of Households received $1,400 more, at $20,800.
| Filing status | 2023 standard deduction | 2022 standard deduction |
|---|---|---|
Single |
$13,850 |
$12,950 |
Married Filing Separately |
$13,850 |
$12,950 |
Married Filing Jointly |
$27,700 |
$25,900 |
Head of Household |
$20,800 |
$19,400 |
What is the additional standard deduction for 2023?
Taxpayers aged 65 and up are eligible for an additional standard deduction of $1,850 if they are single filers or heads of households, and $1,500 per qualifying individual if they are married (either filing jointly or separately).
Individuals who fall within the IRS’ disability category of blindness are eligible for an additional standard deduction of $1,850 for single filers or heads of households, and $1,500 per qualifying individual as a married couple filing separately or jointly.
What is the standard deduction for 2024?
For tax year 2024, the standard deduction increased by 5%. Single filers and married couples filing separately received $750 more, at $14,600. The standard deduction for married couples filing jointly received a $1,500 increase, to $29,200, while head of Households got an additional $1,100 over the previous year, at $20,800.
| Filing status | 2024 standard deduction | 2023 standard deduction |
|---|---|---|
Single |
$14,600 |
$13,850 |
Married Filing Separately |
$14,600 |
$13,850 |
Married Filing Jointly |
$29,200 |
$27,700 |
Head of Household |
$21,900 |
$20,800 |
What is the additional standard deduction for 2024?
In the tax year 2024, the additional standard deduction for those 65 and up is $1,950 for single filers or heads of households and $1,550 per qualifying individual if they are married (either filing jointly or separately). Those who are considered blind as defined by the IRS are entitled to an additional standard deduction of $1,950 for single filers or heads of households, and $1,550 per qualifying individual as a married couple filing separately or jointly.
How much is my standard deduction?
The IRS has created a tool that makes it easy to see what your standard deduction will be in any given tax year.
You will need to have on hand:
- Your date of birth
- Your spouse’s date of birth, if applicable
- Your filing status
- Your adjusted gross income
How does the standard deduction work?
Unlike a refund, you don’t “get back” the standard deduction. Rather, it’s a step you claim during your tax filing process, and it reduces the amount of taxable income on your tax return. This could result in a lower tax bill.
When it comes to deductions, taxpayers have two choices: 1. Either claim the standard deduction, or 2. Itemize their deductions, whichever results in lower taxes. Many choose the standard deduction because it is quick and easy — you don’t have to keep track of your expenses. However, choosing to itemize your deductions may prove more beneficial to higher-income earners (with salaries of $200,000 or more).
Why is there a standard deduction anyway?
There was a time in America, in the early 1900s, when only the very wealthy (those earning more than $3,000 a year) paid taxes. It was a complicated procedure that involved more than two dozen income brackets, and since there weren’t computers, receipts were counted manually toward deductions.
The 16th Amendment, ratified on February 3, 1913, imposed a more broad-based federal income tax “without regard to any census or enumeration.” It raised federal revenue to fund World War I and, after the Great Depression, the New Deal. By the advent of World War II, more than 70% of Americans were paying income taxes.
In 1944, the U.S. Congress aimed to create a tax shelter for the middle classes as well as simplify the cumbersome process of filing taxes. It passed a “standard” deduction: Taxpayers could deduct 10% from their taxable income, up to a maximum of $500, without providing receipts. 90% of taxpayers in claimed it that year alone. Through decades and subsequent inflation, the standard deduction would grow to what we know today.
