Your calculations are done, you’ve filled out all the right documents, and you’ve already e-filed your taxes. But, there’s a nagging feeling…your tax calculations aren’t as accurate as they could be. Let’s take a look at how to calculate taxes with standard deduction.
Do you run a virtual business and need to know how to calculate taxes with standard deduction? Are you looking for ways to include business related expenses on your tax form? Is this the first time that you are filing taxes as a self-employed person? These are the most frequently asked questions by those undergoing filing taxes for the first time. Let’s get started talking about doing taxes by reviewing some of the steps in doing taxes.
Calculating taxes with a standard deduction is very similar to calculating them with a personal exemption.
The first thing you’ll want to do is determine your adjusted gross income (AGI). This is the total of all of your taxable income minus any deductions and exemptions you’ve claimed. Then, add up all of your expenses and subtract those from your AGI. The result is the amount of money remaining after all of your deductions have been taken into account.
Next, multiply this amount by 30% of the amount that’s left over after subtracting all of your expenses from your AGI. This will give you an estimate for how much tax you will owe on this income if you use the standard deduction rather than itemizing deductions.
The standard deduction is a way to reduce your taxable income if you don’t earn enough to claim all of the other deductions and exemptions on your tax return.
For example, if you’re single and have no dependents and live in California, you can claim a standard deduction of $3,700. If you’re married filing jointly with one spouse working full time and earning $50,000 per year, you can claim a standard deduction of $6,100.
The amount of the standard deduction depends partly on your filing status. If you are married filing jointly with no children or qualifying relatives and have only one job, the standard deduction will be larger than for other filing statuses.
What Is Standard Deduction?
The term standard deduction refers to the portion of income not subject to tax that can be used to reduce your tax bill. The Internal Revenue Service (IRS) allows you to take the standard deduction if you do not itemize your deductions using Schedule A of Form 1040 to calculate taxable income. The amount of your standard deduction is based on your filing status, your age, and whether you are disabled or claimed as a dependent on someone else’s tax return.
- The standard deduction is the portion of income not subject to tax that can be used to reduce your tax bill.
- The IRS adjusts the standard deduction each year for inflation.
- The amount of your standard deduction is based on your filing status, age, and other criteria.
- Taxpayers can choose between a standard deduction and itemized deductions.
- Most individuals choose the standard deduction because they don’t have to keep track of every possible qualifying expense.1
Understanding the Standard Deduction
Income tax is the amount of money that the federal or state government takes from your taxable income. It is important to note that taxable income and total income earned for the year are not the same. This is because the government allows a portion of the total income earned to be subtracted or deducted to reduce the income that is taxed. Taxable income is usually smaller than total income due to deductions, which help lower your tax bill.23
The IRS allows taxpayers to choose between two different types of deductions—a set of itemized deductions and the standard deduction. The standard deduction is a certain figure set by the government that can be subtracted from your taxable income. When you claim this figure on your annual tax return, it reduces the amount of income on which you’re taxed. The standard deduction is updated each year for inflation and reflects your tax filing status.
You can take advantage of an additional standard deduction if you are 65 or over at the end of the tax year (you are considered to be 65 on the day before your 65th birthday). People who are blind may claim an additional deduction, provided they are blind on the last day of the tax year. If you can be claimed as a dependent on someone else’s tax return, your standard deduction for 2022 is limited to the greater of $1,150 or your earned income plus $400 (up to the amount of the basic standard deduction for your filing status).4 A dependent’s standard deduction rises to $1,250 in 2023 or the earned income plus $400.
Special Considerations
Not all taxpayers qualify for the standard deduction, which means these individuals can’t claim this deduction. You can’t claim it if you:
- Are married and filing separately and your spouse itemizes their deductions
- Are a nonresident or dual-status alien during the year
- File a return for less than 12 months because you change your annual accounting period
- Are a trust, common trust fund, partnership, or an estate
If the total value of itemized deductions is higher than the standard deduction, you would itemize. Otherwise, you should opt for the standard deduction.7
Students and business apprentices from India may be eligible to claim the standard deduction under Article 21 of the U.S.A.-India Income Tax Treaty.8
Standard Deduction Amounts
New standard deduction amounts were introduced by the Tax Cuts and Jobs Act at the end of 2017 and nearly doubled the previous amounts. They are set to expire on Dec. 31, 2025.9
Here are the standard deduction amounts for the 2022 and 2023 tax years:1011
| Standard Deductions for 2022 and 2023 | ||
|---|---|---|
| Filing Status | 2022 Standard Deduction | 2023 Standard Deduction |
| Single | $12,950 | $13,850 |
| Married Filing Separately | $12,950 | $13,850 |
| Heads of Household | $19,400 | $20,800 |
| Married Filing Jointly | $25,900 | $27,700 |
| Surviving Spouses | $25,900 | $27,700 |
As noted above, the federal income tax system and some states have higher standard deductions for people who are at least 65 and for people who are blind. Under federal guidelines, if you are 65 or older or you are blind, you can claim an additional standard deduction of $1,400 for 2022 or $1,500 for 2023. Those amounts increase to $1,750 for 2022, and $1,850 for 2023, if you are unmarried and aren’t a surviving spouse.1213
Standard deductions for an individual being claimed as a dependent cannot be more than $1,150 or the total of $400 plus the individual’s earned income for 2022.13 The deduction increases to $1,250 for the 2023 tax year, while the total of $400 plus the earned income stays the same.5
You can also increase your standard deduction by the net amount of a disaster loss, but the loss must happen in a federally declared disaster area.14
Standard Deduction vs. Itemized Deductions
The biggest reason taxpayers use the standard deduction instead of itemized deductions is that they don’t have to keep track of every possible qualifying expense throughout the year. Many people may also find the standard deduction amount greater than the total that they could reach if they added up all their eligible tax-deductible expenses separately.
This may be especially true given that the Tax Cuts and Jobs Act limited total state and local tax deductions to $10,000.15 It also limited the mortgage interest deduction on properties bought after Dec. 15, 2017, to the first $750,000 of debt ($375,000 if married filing separately). The limit was $1 million under previous rules.16
Whether you use the standard deduction or itemize your deductions is up to you, but you cannot do both. The itemized deduction option allows you to list all your tax-deductible expenses for the year, such as:
- Property tax
- Medical expenses
- Eligible charity donations
- Gambling losses
- Other costs incurred that influence your bottom-line tax figure177
What Is the Standard Deduction for 2022?
For tax year 2022, the standard deduction is $12,950 if you file as single or married filing separately. It’s $19,400 for heads of household and $25,900 for married filing jointly or qualifying widow(er) taxpayers.11
What Is the Standard Deduction for 2023?
For Tax Year 2023, the standard deduction is $13,850 if you file as single or married filing separately. It’s $20,800 for heads of household and $27,700 for married filing jointly or qualifying widow(er) taxpayers.10
What Can I Deduct if I Take the Standard Deduction?
You can claim above-the-line deductions including retirement plan contributions, health savings account (HSA) contributions, alimony, educator expenses, student loan interest, and health insurance premiums for individual health insurance policies if you are self-employed.
How the Standard Deduction Works
When you file taxes, there are two ways to claim deductions, which are dollar amounts that reduce your taxable income. You can choose to itemize deductions, or you can choose the standard deduction. While itemized deductions require multiple calculations across a variety of tax topics, the standard deduction is a set number that doesn’t take much of your personal circumstances into consideration.
There are five standard deductions, based on your filing status and whether you’re married:
- Single
- Married filing jointly
- Married filing separately
- Qualifying widow(er)
- Head of household (single but with one or more dependents)
Note
All of these statuses have different qualifying rules, standard deductions, tax rates, and credit and deduction eligibility.
An Example of the Standard Deduction
Once you identify your standard deduction, you then can deduct that amount from your taxable income. For example, if you’re married and filing jointly with your spouse, you may decide to take your standard deduction of $25,900 in tax year 2022.
If your taxable income for both you and your spouse is $75,900 for the year, then your standard deduction would drop your taxable income to $50,000. Other deductions may be able to lower your taxable income even further.
How Much Is the Standard Deduction?
The standard deduction you qualify for depends on your filing status, your age, and whether you’re blind. The IRS offers an interactive tool to figure out how much you’re entitled to if you’re not sure of your filing status. It takes about 15 minutes to complete. These are the standard deduction amounts for each filing status for tax years 2022 and 2023:1
| Filing Status | 2022 Deductions | 2023 Deductions |
| Single | $12,950 | $13,850 |
| Head of Household | $19,400 | $20,800 |
| Married Filing Jointly | $25,900 | $27,700 |
| Married Filing Separately | $12,950 | $13,850 |
| Qualifying Widow(er) | $25,900 | $27,700 |
Special Adjustments for Standard Deductions
These across-the-board numbers based on filing status can be tweaked somewhat for some taxpayers, and other rules determine who can claim the standard deduction as well.
Standard Deduction Based on Age or Blindness
Taxpayers who are age 65 and older, and individuals who are legally blind receive an additional standard deduction. It’s calculated by adding the taxpayer’s standard deduction based on their filing status, plus an additional amount.
The additional amount for taxpayers who are 65 or older or blind is $1,750 if single or head of household and $1,400 for married filing jointly in tax year 2022.2
Note
You reach age 65 on the day before your 65th birthday, according to IRS rules.3
Special Rule for Married Couples
You and your spouse must both take the standard deduction, or you must both itemize your deductions if you’re married but filing separate returns. You can’t mix and match, with one spouse itemizing and the other taking the standard deduction.
It usually makes sense to figure your taxes both ways, with each spouse itemizing and each spouse taking the standard deduction, to find out which yields the better overall tax savings.
Standard Deduction for Dependents
Taxpayers who can be claimed as dependents on someone else’s tax return have variable standard deduction amounts. For the 2022 tax year, their standard deduction is limited to either $1,100 or their earned income plus $350, whichever is more. In either case, the deduction is capped at the amount of the standard deduction for their filing status—it can’t be more.2
Standard Deductions vs. Itemized Deductions
Many taxpayers have found that the standard deduction amount offers a bigger deduction than all their itemized deductions combined, but it all depends on your filing status and economic factors. If you total up all of your allowed deductions and the total you get is greater than the standard deduction, it would probably be wise to itemize.