The standard deduction is the amount taxpayers can subtract from income if they don’t break out deductions for mortgage interest, charitable contributions, state and local taxes and other items separately on Schedule A. Listing these deductions separately is called “itemizing.”
For 2021, the standard deduction is $12,550 for single filers and $25,100 for married couples filing jointly. For 2022, it is $12,950 for singles and $25,900 for married couples.
In 2017, Congress made a landmark change by nearly doubling the standard deduction, and the percentage of filers itemizing deductions dropped to about 11% in 2019 from about 31% in 2017, according to the latest IRS data. This shift has simplified returns for about 30 million filers and lightened the agency’s burden by reducing the number of deductions it needs to monitor.
However, taxpayers taking the standard deduction don’t get a specific tax break for having mortgage interest or making charitable donations. (For 2021, Congress is allowing charitable deductions of small amounts by filers who don’t itemize.) That change will likely affect future decisions about making donations or owning a home.
Personal exemption repealed until 2026
In another landmark shift, Congress temporarily repealed the personal exemption at the same time that it nearly doubled the standard deduction. This exemption was a subtraction from income for each person included on a tax return—typically the members of a family. The 2017 amount was $4,050 per person, and it phased out for higher earners.
The personal exemption was also integral to figuring out an employee’s correct withholding from pay.
SHARE YOUR THOUGHTS
Do you typically claim a standard deduction or itemize deductions when filing your taxes? Join the conversation below.
The interaction of the expanded standard deduction, repealed personal exemption and the expanded child tax credit is complex, and the effects on individuals have varied widely. In part that is because the personal exemption was a deduction from taxable income, while the child credit is a dollar-for-dollar offset of taxes—and taxpayers can get it for 2021 even if they don’t owe income taxes.
Both the personal-exemption repeal and the expanded standard deduction expire at the end of 2025.
This year’s tax deadline for most individuals is April 18. Interested in knowing more before you file your taxes? Register here to read the WSJ Tax Guide 2022.
Write to Laura Saunders at Laura.Saunders@wsj.com and Richard Rubin at richard.rubin@wsj.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Source: finance.yahoo.com