Older adults found some relief from inflation last year following the largest cost of living adjustment for Social Security’s cost of living adjustment in 40 years.
But the tax man’s coming now, and people may want to find ways to reduce their taxable income.
One way is to take the extra standard deduction.
Everyone knows about the standard deduction, which is a flat dollar amount determined by the IRS that lowers your taxable income without having to itemize deductions like mortgage interest and charitable donations. But there’s an extra one — on top of the standard deduction — available to people 65 years and older at the end of the tax year.
A larger overall deduction for older adults further reduces their taxable income, and that means a smaller tax bill and more money in your pocket.
Here’s how it works.
Who’s eligible for the extra standard deduction?
Taxpayers who are 65 years or older. The amount of the additional standard deduction varies depending on filing status; if you or your spouse is at least 65 years old; and if you or your spouse is blind.
For tax year 2023, you’re considered 65 years old if you were born before January 2, 1958, the IRS said. If you or your spouse are also blind by yearend, you can claim an even larger additional deduction. You also can’t be claimed as a dependent or itemize your taxes, among other things.
People who are blind and under 65 receive the additional standard deduction, not the larger one.
How much is the additional standard deduction?
For tax year 2023, the additional standard deduction amounts for taxpayers who are 65 and older or blind are:
$1,850 for single or head of household
$1,500 for married taxpayers or qualifying surviving spouse
If you are 65 or older and blind, the extra standard deduction is:
$3,700 if you are single or filing as head of household
$3,000 per qualifying individual if you are married, filing jointly or separately
The above amounts are in addition to the regular standard deductions of:
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$13,850 if single or married filing separately
$20,800 if head of household
$27,700 if married filing jointly or qualifying surviving spouse
Starting in 2023, people with Medicare Part B may be able to save money on their premiums, as well as their annual deductible.
Should I itemize or take the standard deduction?
Nearly 90% of Americans take the standard deduction, IRS data from tax year 2020 show.
However, whether you should itemize or not depends on whether the total of your itemized deductions tops your standard deduction or if you must itemize deductions because you can’t use the standard deduction, the IRS says.
Hints as to whether you may benefit from itemizing, without doing detailed calculations, could lie in whether you had a major life event like buying or selling a home; incurred significant medical expenses; or made sizable donations, experts say.
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at [email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
This article originally appeared on USA TODAY: What is the extra standard deduction for seniors over 65? A breakdown.