In recent times, older adults in the United States have found some solace from the biting effects of inflation, particularly with the largest cost-of-living adjustment to Social Security witnessed in four decades. This adjustment has been a welcome change, offering a much-needed financial boost. However, as the adage goes, nothing is certain except death and taxes, and the latter is particularly relevant as tax season approaches.
Navigating the Tax Maze: The Extra Standard Deduction
An effective strategy for reducing taxable income, especially for older adults, involves leveraging the extra standard deduction. While many are familiar with the standard deduction – a fixed amount set by the IRS to reduce taxable income without the need to itemize – there is an additional deduction available for individuals aged 65 and above at the end of the tax year.
This larger deduction for older adults translates to a reduced taxable income, leading to smaller tax bills and more disposable income.
Eligibility Criteria for the Extra Standard Deduction
To qualify for this additional deduction, a taxpayer must be 65 years or older. The amount of this deduction varies based on several factors including filing status, age (65 or older), and visual impairment status. As per the IRS guidelines for the tax year 2023, individuals born before January 2, 1959, are considered eligible. Furthermore, if you or your spouse are legally blind, as evidenced by a doctor’s note, you can claim an even larger deduction. However, to be eligible, you must not be claimed as a dependent or choose to itemize your taxes.
Interestingly, individuals who are blind but under 65 can still receive the additional standard deduction, albeit not as large as their older counterparts.
How Much Can You Deduct?
For the tax year 2023, the additional standard deduction amounts vary. For instance, single taxpayers or heads of households who are 65 and older or blind can deduct an additional $1,850, while married taxpayers can deduct $1,500 per qualifying person. This means a married couple, both over 65, could potentially deduct a total of $30,700, combining their standard and additional deductions.
For those who are both 65 or older and blind, the deduction amounts are even more substantial: $3,700 for singles or heads of households and $3,000 per qualifying individual for married couples.
These amounts are in addition to the regular standard deductions, which for the tax year 2023, stand at $13,850 for single or married filing separately, $20,800 for head of household, and $27,700 for married filing jointly or qualifying surviving spouse.
Making the Right Choice: Itemize or Standard Deduction?
While nearly 90% of Americans opt for the standard deduction, the decision to itemize or not depends on individual circumstances. The IRS suggests that itemizing may be beneficial if the total of itemized deductions exceeds the standard deduction or if certain conditions preclude the use of the standard deduction.
Life events such as buying or selling a home, incurring significant medical expenses, or making substantial charitable donations could be indicators that itemizing might be more advantageous.
The extra standard deduction available to older adults is a significant tool in managing tax liabilities and maximizing income, especially amidst the challenges posed by inflation. As with all tax matters, it is crucial to understand the nuances and make informed decisions based on individual financial situations.
For more detailed information and guidance, refer to the original article on USA Today, which delves deeper into this topic, offering insights and clarity on navigating these tax provisions.