With the April 15 tax deadline just a few weeks away you should be aware of some adjustments to the standard deduction thresholds. Keep in mind that the standard deduction is in addition to any eligible freelance tax deductions that you may be able to claim.
The 2023 changes to the standard deduction under the Inflation Reduction Act (IRA) are as follows:
- For married couples filing jointly for tax year 2023, the standard deduction rises to $27,700 up $1,800 from the prior year.
For single taxpayers and married individuals filing separately, the standard deduction rises to $13,850 for 2023, up $900.
- For heads of households, the standard deduction will be $20,800 for tax year 2023, up $1,400 from the amount for tax year 2022.
Some back and bicep other tax thresholds you may wish to take note of as you work on your 2023 tax return include the marginal income tax rates, which are:
- 37% for individual single taxpayers with incomes greater than $578,125 ($693,750 for married couples filing jointly).
- 35% for incomes over $231,250 ($462,500 for married couples filing jointly)
- 32% for incomes over $182,100 ($364,200 for married couples filing jointly)
- 24% for incomes over $95,375 ($190,750 for married couples filing jointly)
- 22% for incomes over $44,725 ($89,450 for married couples filing jointly)
- 12% for incomes over maximizing gains ,000 ($22,000 for married couples filing jointly).
For 2023, as in 2022, 2021, 2020, 2019 and 2018, there is no limitation on itemized deductions. This means that if you have a significant number of expenses in excess of the standard deduction noted above you may wish to itemize those to take advantage of greater tax savings.
In addition, the standard deduction applies to personal expenses and does not take the place of the business deductions that you can take as a freelance business owner.
Be sure to document and itemize all business expenses for your business including health care premiums and copays, advertising, business meals and travel, office supplies, any rent for office space or your home office deduction, continuing education, as well as any other reasonable and necessary expenses.
With the deadline for 2023 freelance tax return filings just around the corner, now is the time to take note of these Inflation Reduction Act increases in the standard deduction to reduce your taxable income further, along with the freelance business expenses that you can claim (with appropriate documentation). If you are unsure of which expenses you can claim for your business, check in with a tax professional.