Your filing status can make a big difference in how much income tax you pay. If you make $40,000 a year, for instance, the amount of tax you will pay depends on which filing status you qualify for. The difference in tax rates are significant and can mean the difference between paying up to 10 percent or 35 percent. Your decision to file single, jointly or as head of household will also affect the size of your standard deduction.
Income tax brackets
As your income goes up, portions of your income are subject to different tax brackets that progressively increase the percentage of tax you pay on that income. If you're single in 2023, for instance, you'd pay 10 percent on your taxable income up to $11,000 then 12 percent on income starting with that up to $44,725.
Choosing a different status may change the point at which you move between brackets. A married couple filing jointly in 2023 stays at 10 percent until their joint taxable income reaches $22,000, while for head of household, the cutoff is $15,700.
Claiming standard deductions
The standard deduction is a set amount you can deduct to reduce the amount of your income that is taxed. It is generally used by people who don’t have enough deductible expenses to make it worth itemizing their deductions.
Although the amounts generally increase each year, in 2023 individuals and married couples filing separately can claim a $13,850 standard deduction, joint filers and qualified widowers can claim an $27,700 deduction and filing as head of household gives you an $20,800 deduction. The standard deduction goes up for filers who are blind or who are 65 or older.
You usually have the option to itemize deductions if the total of those deductions is larger than the standard deduction for your filing status. Generally, the payment of mortgage interest, medical bills, state property taxes and charitable contributions you make are eligible to be itemized.
Your ability to lower your taxes by itemizing depends on your filing status since the larger the standard deduction you are eligible to claim, the more expenses you must pay during the year to make it worth itemizing.
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