IRS Just Raised Standard Deductions—Will You Be Affected?
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If there’s anything you can count on with the Internal Revenue Service (IRS), it’s that you’ll have to pay your taxes each and every year. But despite this consistency, the agency might still make some changes from time to time that can affect the way you file —and can even change how much you owe. And now, the IRS has announced that it raised standard deductions for this year’s filing. Read on to see if you’ll be affected by the change and what it could mean for you.
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How to file taxes can vary pretty significantly from person to person, based on their work, family, and other life situations. This includes deductions, which taxpayers can claim for things like charitable contributions, a home office space, or home mortgage interest to bring down the amount they owe in any given year if they qualify.
But while some opt for the line item deductions, the IRS also offers a standard deduction. This is an amount set by the tax agency that you can take off your adjusted gross income, which will decrease what you owe in a filing, according to personal finance website NerdWallet. This blanket amount can remove the extra work and documents needed for itemized deductions.
While the amount is uniform, it still changes based on a few conditions. Those who are 65 or older can often receive a higher standard deduction, as well as those who are blind. But anyone who can be claimed as a dependent on another person’s filings will see a lower amount, according to the IRS.
Opting for the standard deduction also limits you from making any other itemized deductions in your filing. And some demographics are excluded from taking them, including couples who file jointly where one member decides to itemize deductions or anyone filing on behalf of a trust, partnership, or estate.
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While eligibility for the standard deduction may change over time for some people, the amount taxpayers can claim also changes based on an annual IRS decision .
“Every year in September, the Bureau of Labor Statistics produces the August consumer price index,” Anthony Burke , an IRS spokesman, said during an interview, WTOP reports. “The IRS takes those figures and applies them to about 60 tax items that have to be, by law, adjusted for inflation. And so, it moves up various rates, various things change, and most of these are beneficial for taxpayers because it has to keep track with inflation to keep things fair.”
And this year is no different . On Oct. 18, the IRS announced it’s increased the standard deduction amounts for 2023, meaning you could take more off when you file next April if you qualify.
Married couples filing jointly can take off $27,700, an increase of $1,800 from the previous year, according to the IRS. Single taxpayers and married couples filing individually will see a $900 increase from last year to $13,850. And those filing as the head of a household can now take $20,800, which is an increase of $1,400 from 2022.
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And the changes don’t stop after this year. The standard deduction will go up once again for the 2024 tax year, according to a news release from the IRS on Nov. 9.
For filings due in April 2025, standard deductions for married couples filing jointly will go up $1,500 to $29,200. Single taxpayers and married people filing separately from their spouses will see their amount rise $750 to $14,6000. And those filing as a head of a household will see a $1,100 increase for a standard deduction of $21,900.
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Along with upping standard deduction amounts, the IRS also recently announced another significant change for the 2023 tax year by revising tax brackets . This means that the agency has moved the set boundaries for income levels on which tax rate they qualify for, once again due to inflation. The overall changes pushed the upper limits seven percent higher than in the 2022 tax year, Forbes reported.
The update could mean some people will pay a different rate this year before deductions. The lowest tax bracket begins at 10 percent for individuals with $11,000 or less in taxable income or $22,000 for married couples filing jointly. It then progressively increases from 12 percent for individuals making between $11,001 and $44,725, 22 percent for those with $44,726 to $95,375 in taxable income, and 24 percent for taxpayers earning between $95,376 to $182,100.
Individuals with an income between $182,101 and $231,250 now have a rate of 32 percent, while people earning between $231,251 and $578,125 fall into a 35 percent rate. It tops out with those who take in $578,126 or more in 2023, paying 37 percent. The complete list of updated brackets and rates—including those for married couples filing jointly or separately—can be found on the agency’s website.
- Source: https://www.irs.gov/taxtopics/tc551
- Source: https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2023
- Source: https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2024
IRS Announces Major Tax Filing Changes for Next Year—How You Can Benefit
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Filing your taxes may be the one thing you count on doing every year, but it might not always be the same process. Even when you haven’t had a major life change such as getting married or starting a new job, the Internal Revenue Service (IRS) still makes adjustments to the process that can affect how you submit your paperwork. In fact, those who are already getting everything in order ahead of the deadline might want to take note after the IRS announced a major set of tax filing changes for next year. Read on to see how you can benefit from the latest update.
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While plenty of people choose to file their taxes online , the process can still involve a decent amount of physical paperwork for some who require extra forms or documentation . But if you’ve had to rely on the postal service to get everything in on time in the past, you can breathe a sigh of relief.
In a Nov. 7 press release, the IRS announced that it had reached its goal of implementing the Paperless Processing Initiative three months ahead of schedule. The program, which was announced in August, makes it possible for taxpayers to submit all correspondence and responses to notices using a Document Upload Tool on the agency’s website.
The new service provides another significant upgrade from the latest changes released last February, which made the nine most common correspondences available for digital reply, Yahoo Finance reports. The prior system relied entirely on using physical mail to conduct business.
Not only will the new system cut processing time in half, but the agency also says the program will help save over 200 million pieces of paper each year. And while the IRS estimates that 94 percent of individual taxpayers will no longer need to use the mail, those who choose to file through the post will still be able to if they choose to do so.
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If there’s any silver lining to paying your taxes, it’s getting a refund down the line. Now, those who are anxious to see some of their cash come back can get a better idea of when it’s coming thanks to the agency’s newly improved Where’s My Refund tool.
According to the IRS announcement, taxpayers will be able to use the online feature to check the precise status of their refund, as well as find out if they need to respond to an agency request for more information. Previously, the tool provided a generic message that didn’t offer any specific information about a person’s filing.
The tool has seen plenty of use in the past, with about 54 million taxpayers using it to generate 550 million hits in 2022, per the IRS. The agency says the detailed updates will likely reduce the number of phone calls made to the IRS for refund status inquiries.
RELATED: 4 Warnings About Using TurboTax, According to Experts .
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When you’re looking for a quick answer to your questions while preparing your taxes, nothing beats the efficiency of a phone call. This year, the agency says it is continuing with improvements it’s made to its phone service to make the service even more accessible.
The agency says it plans to reach at least an 85 percent level of service once again during the 2024 filing season, carrying over improvements made to the system during last year’s filing brought about by hiring a stable of new representatives, per the press release. The IRS will also aim to have an average wait time of five minutes or less and offer a call-back option if the projected wait time is longer than 15 minutes.
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Those who want some in-person help will also see some improvements. The agency says it is opening or has reopened 50 Taxpayer Assistance Centers nationwide and will be increasing the number of available hours for assistance by more than 8,500 hours. The complete list of locations and reopening dates can be found in the press release.
The IRS also says it will be rolling out more pop-up centers and aims to increase the number of taxpayers receiving free in-person preparation assistance by 50,000 returns. All told, some experts think the updates could help smooth out what can be a notoriously tricky and confusing process.
“I think these changes are good news,” Grant Dougherty , enrolled agent and founder of Dougherty Tax Solutions, told Yahoo Finance. “Anytime the taxpayer experience can be improved, I think it’s always a win for everyone involved. I do believe the [2024 filing season] will be a little smoother.”
