IRS Announces New Standard Deductions for 2022 – Forbes Advisor

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Each year when you fill out your federal income tax return, you have a choice: take the standard deduction or itemize deductions. Most taxpayers claim the standard deduction, which is a predetermined amount set annually by the IRS.

How much is the standard deduction worth in 2021 and 2022? That depends on your filing status, age, whether you are blind, and whether another taxpayer can claim you as a dependent.

What Is the Standard Deduction for 2021 and 2022?

The IRS recently released the new tax brackets and standard deduction amounts for the 2022 tax year (the tax return you’ll file in 2023). Let’s review the standard deduction amounts for 2021 and 2022 available to most taxpayers.

How Does the Standard Deduction Work?

The standard deduction is the simplest way to reduce your taxable income on your tax return. Rather than tracking actual expenses, saving receipts, and filling out additional tax forms, you simply claim a flat dollar amount determined by the IRS.

There’s a wide range of expenses you can claim as itemized deductions, including out-of-pocket medical expenses, state and local taxes, home mortgage interest, and charitable contributions.

To itemize these deductions, you have to keep receipts or other documentation providing you spent the money.

Whether you itemize or claim the standard deduction, it reduces your taxable income. For example, if you filed as a single taxpayer and earned $75,000 in 2021, claiming the standard deduction of $12,550 would reduce your taxable income to $62,450.

Generally, the standard deduction is available to anyone who doesn’t itemize, although there are a few exceptions. You cannot claim the standard deduction if:

  • You are married and file separately from a spouse who itemizes deductions
  • You were a nonresident alien or dual-status alien during the tax year
  • You file a return for less than 12 months due to a change in your accounting period
  • You file as an estate or trust, common trust fund, or partnership

Can Itemizing Save You Money?

For some people, itemizing reduces their tax bill more than claiming the standard deduction would. Consider itemizing if your total itemized deductions are greater than the standard deduction available for your filing status (and don’t fall under one of the exceptions listed above). However, roughly 90% of taxpayers choose to claim the standard deduction.

This wasn’t always the case. Before the Tax Cuts & Jobs Act (TCJA) of 2017, roughly 30% of taxpayers itemized deductions. But the TCJA temporarily increased the standard deduction — nearly doubling it for all filing statuses. It also eliminated or restricted several itemized deductions, including:

  • Capping the state and local tax (SALT) deduction at $10,000
  • Limiting the home mortgage interest deduction to interest paid on up to $750,000 of mortgage debt (up to $375,000 if married filing separately)
  • Eliminating unreimbursed employee expenses

As a result, fewer people benefit from itemizing — a situation that’s likely to remain until those provisions of the TCJA expire on December 31, 2025, or Congress makes changes sooner.

What Is the Additional Standard Deduction?

Taxpayers who are age 65 or older or blind can claim an additional standard deduction (an amount that you add to the standard deduction amount for which you qualify).

Navigating the additional standard deduction amounts can be confusing. The IRS Instructions for Form 1040 include a table to help you calculate the standard deduction available to you based on when you (and your spouse, if applicable) were born and whether you and your spouse are considered legally blind. However, the instructions for 2021 tax returns aren’t available yet, and likely won’t be available before mid-January.

Let’s run through a couple of examples of how the additional standard deduction can work.

Example 1: Jim and Susan are a married couple who file a joint return. They are both over the age of 65. Susan is blind; Jim is not.

For 2021, they get the normal standard deduction of $25,100 for a married couple filing jointly. They also both get an additional standard deduction of $1,350 for being over age 65. They get one more additional standard deduction because Susan is blind. As a result, their 2021 standard deduction is $29,150 ($25,100 + $1,350 + $1,350 + $1,350).

For 2022, assuming there are no changes to their marital or vision status, Jim and Susan’s standard deduction would be $30,100. That’s the normal standard deduction of $25,900 for married taxpayers filing joint returns, plus three additional standard deductions at $1,400 apiece.

Example 2: Ellen is single, over the age of 65, and not blind. For 2021, she gets the normal standard deduction of $12,550, plus one additional standard deduction of $1,700 for being over the age of 65. Her standard deduction would be $14,250.

For 2022, assuming no changes, Ellen’s standard deduction would be $14,700. That’s the normal standard deduction of $12,950 available to single filers, plus one additional standard deduction of $1,750 for being over the age of 65.

IRS Definition of Blindness

To claim an additional standard deduction for blindness, you (or your spouse, if applicable) must be either totally blind by the end of the tax year or get a statement certified by our ophthalmologist or optometrist stating:

  • You can’t see better than 20/200 in your better eye with glasses or contact lenses, or
  • Your field of vision is 20 degrees or less

Standard Deduction for Dependents

If another taxpayer can claim you as a dependent, your standard deduction is limited. For 2021, the standard deduction for dependents is limited to the greater of $1,100 or your earned income plus $350 (but the total can’t be more than the normal standard deduction available for your filing status).

For 2022, the limit is $1,150 or your earned income plus $400, whichever is greater. Again, it can never be greater than the normal standard deduction available for your filing status.

For example, say Sarah is a college student who is a dependent of her parents and earned $15,000 from a part-time job in 2021. When Sarah files her tax return, her standard deduction will be the greater of:

  • $1,100, or
  • $15,350 (her $15,000 of earned income plus $350)

However, since her standard deduction can’t be greater than the normal standard deductible available for her filing status, her standard deduction in 2021 would be $12,550.

Now, let’s say in 2022, Sarah works less, so her earned income is only $10,000. Her standard deduction would be the greater of:

  • $1,150, or
  • $10,400 (her $10,000 of earned income plus $400)

Sarah’s standard deduction for 2022 would be $10,400 since it’s less than the normal standard deduction available for her filing status ($12,950 in 2022)

Claiming the standard deduction is usually the easier way to do your taxes, but if you have a lot of itemized deductions, add them up and compare them to the standard deduction for your filing status (most tax filing software will help you do this) . If you have enough deductions, itemizing might be the more beneficial route this tax season.

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