IRS Change: More Money in Your Pocket
A recent amendment by the IRS regarding standard deductions could mean a welcome increase in refunds for many Americans this tax season.
The Internal Revenue Service has raised the standard deduction for the 2023 tax year; single filers will see an increase of $900, bringing their total standard deduction to $13,850. For married couples filing jointly, the standard deduction has grown by $1,800, reaching a sum of $27,700. This change is designed to alleviate some of the financial pressures caused by ongoing inflation.
“It’s a win-win for both the IRS and taxpayers,” Alex Beene, a financial literacy instructor, explained. He emphasized how this adjustment aligns with the need to adapt to inflation, which has kept the cost of living high across various sectors, including groceries, housing, and fuel. By increasing the standard deduction, the IRS aims to preserve the buying power of the taxpayers amidst these economic challenges.
Zack Hellman, a tax preparation expert, adds that while the standard deduction increase might not directly translate to a refund, it effectively reduces taxable income, sparing taxpayers from higher tax liabilities and simplifying the filing process.
About a decade ago, many Americans opted for itemized deductions, a process that was both time-consuming and complex for the taxpayers and the IRS alike. The shift towards a predominantly standard deduction system simplifies tax filing, benefits a significant majority of taxpayers, and enhances the efficiency of the tax collection process. Alex Beene estimates that approximately 90 percent of filers now prefer the standard deduction.
Renters, in particular, might find the increased standard deduction especially beneficial, as it offers a larger deduction without the complexities of homeownership, such as mortgage interest and real estate taxes — expenses that often make itemizing deductions more appealing for homeowners. “I don’t know that it equalizes it, but it certainly helps those who don’t own a home or those financially blocked out of homeownership,” remarked Eric Green, a leading tax attorney.
Moreover, the IRS provides extra incentives for taxpayers meeting certain conditions. For the 2023 tax year, individuals who are 65 or older, or who are blind, qualify for an additional standard deduction of $1,850 for single filers and $1,500 for married filers.
Beyond adjustments to the standard deduction, the IRS has revised its tax brackets, potentially reducing tax bills for many. For instance, an individual earning $44,000 will be taxed at a rate of 12 percent, a significant cut from the previous rate of 22 percent.
As the tax filing deadline of April 15 approaches, the IRS anticipates over 128 million returns. With these updates in place, Americans are encouraged to file their taxes promptly to benefit from these changes.
This tax season, the IRS’s policy changes not only aim to mitigate the impact of inflation but also simplify tax filing, making it more straightforward for millions of Americans. With the increased standard deductions and adjusted tax brackets, many can anticipate a lighter tax burden and potentially larger refunds.
