IRS Boosts Standard Deduction for 2023 and 2024, Offering Potential Tax Relief for Americans

Within the US tax system, the standard deduction serves a crucial role in affecting the financial situation of numerous taxpayers. Described as a set dollar amount that reduces taxable income, this deduction depends on the individual’s filing status. Furthermore, the eligibility criteria cover aspects such as age, dependency status, and particular disabilities.

In the realm of US taxation, the standard deduction serves as a pivotal element, shaping the financial landscape for millions of taxpayers. Defined as a fixed dollar amount that mitigates taxable income, this deduction is contingent upon one’s filing status. Moreover, eligibility criteria extend to factors like age, dependency status, and specific disabilities.

Some people may find themselves left out from the standard deduction coverage. This group includes married taxpayers who file separately when their spouse details deductions, nonresident aliens, individuals who filed taxes less than 12 months ago due to accounting period changes, and those filing as trusts or estates.

For a clearer perspective, let’s consider an illustrative example: Suppose an individual’s income for the tax year 2023 is $50,000, and their filing status is single. Applying the standard deduction of $13,850 implies that taxes are calculated only on the remaining $36,150 of income.

The evolution of the standard deduction is marked by a significant increase over the past decade. The Tax Cuts and Jobs Act, spearheaded by President Donald Trump in 2017, nearly doubled the standard deduction amount, compelling a shift in taxpayer behavior. 

Prior to this, 47 million Americans opted for itemized deductions. Post-Act, the number plummeted to a mere 18 million, signifying a paradigm shift where approximately 90% of taxpayers now opt for the standard deduction.

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IRS Raises Standard Deduction

irs-boost-standard-deduction-2023-2024-offering-potential–tax-relief-americans
Within the US tax system, the standard deduction serves a crucial role in affecting the financial situation of numerous taxpayers.

In the tax year 2023, the Internal Revenue Service (IRS) raised the standard deduction by $900 for single filers and married couples filing separately, pegging it at $13,850. Married couples filing jointly witnessed an $1,800 increase to $27,700, while Head of Households received $1,400 more, reaching $20,800.

An additional standard deduction is available for specific demographics. Taxpayers aged 65 and above qualify for an extra $1,850 (single filers or heads of households) or $1,500 per qualifying individual (married, either filing jointly or separately). Individuals categorized as blind according to IRS criteria are entitled to the same additional standard deductions.

Looking ahead to the 2024 tax year, the standard deduction experienced a 5% increment. Single filers and those married filing separately received a boost of $750, now standing at $14,600. For married couples filing jointly, the standard deduction increased by $1,500, reaching $29,200, while Head of Households saw an additional $1,100, reaching $20,800.

In addition to the standard deduction, it’s important to consider the additional standard deduction for 2024. Individuals who are 65 and older will receive $1,950 if filing as singles or heads of household, and $1,550 per qualifying person if married (filing jointly or separately). Similarly, individuals classified as visually impaired by the IRS are eligible for the same additional standard deductions.

Delving into history, the inception of the standard deduction traces back to the early 1900s when only the affluent, earning over $3,000 annually, bore the tax burden. The tax system, comprising over two dozen income brackets and manual deduction calculations, underwent a transformative shift with the ratification of the 16th Amendment in 1913. Crafted to fund World War I and later the New Deal during the Great Depression, this amendment laid the foundation for a more inclusive taxation system.

In 1944, amidst the chaos of World War II, the US Congress introduced the “standard” deduction, allowing taxpayers to deduct 10% from their taxable income, capped at $500, without the need for detailed receipts. 

This action was taken to offer a tax shelter for the middle class and reduce the complex tax-filing process. Over the years, due to inflation, the standard deduction has become an essential factor in shaping the current tax surroundings.

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