This Could Be the Easiest Tax Break You’ll Snag in 2023

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You don’t need to be a tax expert to benefit from it. 

Paying taxes is an expense every working American needs to account for. And whether you have your taxes deducted from your paycheck every few weeks or you’re self-employed and make estimated quarterly payments, they’re something you have to think about year-round.

But most people don’t tend to focus on taxes until the time comes to work on their actual tax returns. And what’s the concept of tax savings really tends to come into play.

The good news is that the U.S. tax code is loaded with benefits that can help taxpayers save money. Tax credits, for example, reduce your tax liability on a dollar-for-dollar basis. So if you owe the IRS $1,000 but are able to claim a $1,000 tax credit, that liability is wiped out completely.

Tax deductions, meanwhile, exempt a portion of your income from taxes. So if you claim a $1,000 tax deduction and your effective tax rate is 22%, you save $220.

Of course, just because the tax code is filled with different credits and deductions you can take doesn’t mean all of them are available to you. You’re allowed to deduct the interest you pay on your mortgage loan, for example. But if you don’t own a home, you won’t have mortgage interest to write off.

Furthermore, many tax breaks have income limits associated with them. And often, that means higher earners can’t benefit from them. But there’s one tax break that is available to anyone filing a tax return.

The standard deduction benefits everyone

No matter how much you earn, you’re entitled to claim the standard deduction on your tax return every year. For 2023, here’s what that deduction looks like based on your filing status:

Single or married filing separately: $13,850Married filing jointly: $27,700Head of household: $20,800

Keep in mind that these numbers represent the standard deduction for the current year, so you’ll claim it on a tax return you file the year after, in 2024. But it’s good to have a sense of what this year’s standard deduction looks like.

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If you’re in the midst of filing your 2022 tax return right now, these are the standard deduction numbers for last year:

Single or married filing separately: $12,950Married filing jointly: $25,900Head of household: $19,400

Should you claim the standard deduction or itemize?

Figuring out whether to take the standard deduction versus itemize is really easy, as it’s a matter of simple math. Let’s say you’re filing your 2022 taxes right now and are single. That gives you a standard deduction of $12,950. If your itemized deductions only add up to $10,400, then the standard deduction is what you should claim, since that’s the higher number.

In many cases, itemizing deductions will make more sense for people who own homes and pay a lot of mortgage interest and property taxes. But this isn’t always the case. Ultimately, it pays to run the numbers to figure out which route to take.

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