The IRS Has Increased the Standard Tax Deduction—Here’s by How Much
The IRS announced the new federal tax rates for 2022 in November 2021. It adjusted income tax brackets for inflation. Did the standard tax deduction increase?
The standard tax deduction is a portion of income not subject to tax that serves to reduce taxation. The amount of your standard deduction depends on many factors, including your age, filing status, and whether you're claimed as a dependent on someone else’s tax return.
When can you claim the standard deduction?
The IRS allows you to take the standard deduction if you don’t itemize your deductions—you can’t do both. Therefore, if you're claiming the standard deduction, you can’t deduct home mortgage interest, medical expenses, charitable donations, or other tax deductions. So, if your standard deduction is lower than your itemized deductions, it would make sense to claim them rather than the standard tax deduction.
If you do claim the standard deduction, however, you could also claim "above-the-line" deductions. These include retirement plan contributions, health savings accounts, alimony, student loan interest, and up to $300 in cash donations you made to qualifying charities during the year.
New standard deduction amounts were introduced by the Tax Cuts and Jobs Act at the end of 2017. This almost doubled the previous standard deduction amounts and eliminated and restricted many itemized deductions in 2018 through 2025. This change increased the number of people claiming standard deductions instead of itemized deductions. The Tax Policy Center estimates that, in 2018, the share of all households that itemized shrank to 10 percent because of the tax overhaul.
Did the standard tax deduction increase?
The standard tax deduction is updated each year for inflation. U.S. inflation started inching up in 2021 and has remained at a multidecade high for the last few months, burning a hole in people’s pockets.
The IRS adjusts income tax brackets annually to reflect consumer prices. For 2022, the IRS is offering a larger standard deduction and higher tax brackets. The changes should mean that taxpayers with the same or even slightly higher taxable income in 2022 compared with 2021 will remain in a lower tax bracket. The adjustments apply to tax returns that will be filed in 2023, according to the IRS.
The new standard deduction amounts
- The standard tax deduction for married couples filing jointly for the tax year 2022 will rise to $25,900, marking an increase of $800 from the prior year.
- For single taxpayers and those who are married but filing separately, the standard deduction will increase by 3.2 percent, from $12,550 to $12,950.
- For the head of household, the deduction is $19,400, an increase of 3.2 percent.
- The standard deduction for an individual being claimed as a dependent cannot exceed $1,150 or the total of $400 plus the individual's earned income for 2022.
- An additional standard deduction is allowed if you're 65 years or older at the end of tax year. People who are visually impaired can claim an additional deduction.