The Standard Deduction 2022: Everything You Need to Know

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Knowing what you can deduct from your income and how that affects your taxes this year has never been more important. To help make understanding all of these different tax deductions easier for you, we’re here today with a complete guide about the ins and outs of the standard deduction 2022.

Read on to discover everything taxpayers need to know in order to maximize refunds or minimize tax payments. Let’s get started!

What is the Standard Deduction 2022?

The standard deduction is a fixed amount that taxpayers who do not itemize deductions can subtract from their gross income when determining the taxable income.

Let’s take a look at a table of the federal income tax system tax year 2022 standard deduction, which has a deadline of April 18, 2023.

How Does the Standard Deduction Work?

The standard deduction reduces the amount of income that is taxable for individuals and families. It is claimed as a deduction on the taxpayer’s 1040 form, which results in a lower total tax due because taxes are calculated on the adjusted (lower) taxable income amount.

The deducted amount does not need to be itemized or documented. Instead, it is a flat amount applied to all filers who choose to claim it. Generally speaking, when taxpayers have fewer deductions than the standard deductions available to them, claiming the standard deduction will result in lower taxes owed.

Who Can claim the Standard Deduction to Reduce Taxable Income?

The standard deduction is an important tool for those looking to reduce taxable income and keep more of what they earn. The following outlines who or what groups can claim the standard deduction based on filing status:

• Individuals - Single filers, heads of households, married filing jointly couples, taxpayers 65 years or older, and those who are blind may all qualify for the basic standard deduction.
• Businesses - Sole proprietorships, partnerships, LLCs, S-corporations, C-corporations, and non-profits may be able to take advantage of the standard deduction if they meet certain criteria.
• Estates & Trusts - Fiduciaries administering the estate or trust may be eligible to claim the deduction on behalf of the estate or trust if some qualifications are met.

Standard Deduction Restrictions

While there are many benefits to claiming the standard deduction, like reducing taxable income and lowering taxes due, there are restrictions on who is allowed to claim it.

To be eligible for the standard deduction, taxpayers must meet certain criteria outlined below:

• Income Limitations - Taxpayers must meet certain income thresholds in order to qualify for the deduction. So people in higher income tax brackets may need to speak with a tax advisor or accountant to determine if they would be better off itemizing their deductions.
• Dual Status Filers - Couples who are married filing separately, when a spouse itemizes deductions, and those with both U.S. citizen and non-citizen spouse status may be restricted from claiming the deduction. This is due to certain complexities that can arise when filing a dual-status tax return.
• Dependents - Dependents are not allowed to claim the standard deduction and must itemize their deductions to lower taxable income. This is because the higher rate of taxation on dependents often results in them having to itemize their deductions rather than claim the standard deduction.
• Itemizers vs. Non-itemizers - Taxpayers that choose to itemize their deductions instead of taking the standard deduction will not be eligible for the deduction in most cases.
• Nondeductible expenses – Medical, dental, and certain other expenses are generally not deductible when taking the standard deduction.
• Annual accounting period change – If a person files a federal income tax return that’s for a timeframe of fewer than 12 months because of a change in their annual accounting period, then they cannot claim a standard deduction.

How to Claim the Standard Deduction and Lower Your Tax Bill

Claiming the standard deduction can be a great way to lower your taxable income and reduce the amount of taxes you owe.

Here is a step-by-step guide on how to claim the standard deduction:

Step 1: Gather Your Tax Documents

The first step when applying for the standard deduction is to gather all of your tax documents, such as a W-2, 1099s, and any other forms that include income information.

Step 2: Calculate Your Income

Once you have collected all of the necessary documents, the next step is to calculate your gross income, which is the total income before any deductions are applied.

Step 3: Calculate Your Deduction Amount

In the case of a standard deduction, you will need to determine which amount is greater: the standard deduction or the total of all itemized deductions.

If the standard deduction is greater, you should choose to claim it.

Step 4: File Your Tax Return

Once you have determined which deduction to claim, you can then move on to filing your tax return.

You will need to include the applicable forms and documents when filing your return.

If you’re self-employed, make sure you know how to file self-employment taxes and research the best tax software for self-employed to fit your specific business needs.

Step 5: Lower Your Tax Liability

Finally, the standard deduction will reduce your taxes owed by reducing your taxable income. This means that you will have less of a tax burden, and you can keep more of what you earn.

Standard Tax Deduction Vs Itemized Deductions

Both the standard deduction and itemized deductions offer taxpayers a way to reduce their taxable income and lower the amount of taxes they are liable for. The main similarity between them is that they both allow people to deduct a certain amount from their gross income.

The major difference between them is how they are calculated. The standard deduction allows taxpayers to deduct a flat amount, whereas itemized deductions are based on actual expenses with receipts and other paperwork required as proof.

Filers must choose one or the other. Those who wish to itemize must give up the standard deduction and vice versa. Ultimately which deduction option yields greater savings for individuals depends on their entire tax picture and financial situation.

The Standard Deduction 2023

The smart taxpayer will start watching their 2023 return now, even if they haven’t filed their 2022 return yet. Here are the 2023 standard deduction amounts for those who plan to take advantage of them early:

The Bottom Line

The standard deduction is an important part of filing your taxes, and it’s important to know how much you’re entitled to. The changes for the 2022 tax year may impact how much you can deduct, so it’s a good idea to be prepared.

By understanding the standard deduction and how it works, you can maximize your deductions and save money on your taxes. If you need help navigating the standard deduction and other deductions, it may be beneficial to consult with a qualified tax professional who can provide you with detailed advice on how to file taxes properly and lower your tax bill.

This way, you can get the most out of your taxes and reduce your overall liability. You can also get free tax advice by calling the IRS if you have any tax questions.

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This article, "The Standard Deduction 2022: Everything You Need to Know" was first published on Small Business Trends

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By: Kevin Ocasio
Title: The Standard Deduction 2022: Everything You Need to Know
Sourced From: smallbiztrends.com/2023/01/standard-deduction-2022.html
Published Date: Fri, 27 Jan 2023 14:00:15 +0000

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