The IRS, in response to the significant inflation growth experienced in recent years, has adjusted the standard deduction amounts for the 2023 tax year, with particular benefits for seniors. This move is part of the agency’s ongoing strategy to index tax benefits to inflation, recognizing the financial pressures faced by various segments of the population, especially older Americans.
For the 2023 tax year, single taxpayers and those married filing separately will see their standard deduction rise to $13,850, a notable increase from the previous year. Couples filing jointly are now eligible for a $27,700 standard deduction, while heads of households can claim $20,800. These increments are a direct response to the rising cost of living, aiming to provide some relief to taxpayers.
Furthermore, the IRS has introduced a significant benefit for taxpayers aged 65 and over. For 2023, these individuals can claim an additional standard deduction of $1,500 per person. Unmarried individuals and those not qualifying as surviving spouses are eligible for an even higher additional deduction of $1,850. In cases where a taxpayer is both 65 or older and blind, this additional deduction doubles to $3,000, further reducing their taxable income.
This policy change is particularly impactful given that a vast majority of American taxpayers – nearly 90% – opt for the standard deduction instead of itemizing their deductions. With these increased deduction amounts, the IRS anticipates that even more people will choose the standard deduction route, thereby simplifying their tax filing process while gaining financial benefits.
For dependents who can be claimed on another person’s tax return, the IRS has set the standard deduction for 2023 at the greater of $1,250 or their earned income plus $400. This provision ensures that even those with limited income can benefit from the standard deduction.
As the tax season approaches, it is vital for seniors and their financial advisors to understand these changes and how they can optimize their tax filings. These adjustments, while a response to inflation, also reflect a broader commitment by the government to provide targeted financial support to senior citizens, acknowledging the unique economic challenges they face.
Intuit Accountants Team. (2023). IRS announces tax year 2023 changes to the standard deduction, EITC, and more. Tax Pro Center | Intuit. Retrieved from https://accountants.intuit.com
Parys, S., & Orem, T. (2024). Standard Deduction 2023-2024: How Much It Is, When to Take It. NerdWallet. Retrieved from https://www.nerdwallet.com