IRS Change Could Mean More Money for Americans

A new IRS policy change means many Americans could get bigger refunds in their pockets this year.

The IRS updated its standard deductions rule for the 2023 tax year to add on $900 for single filers. Meanwhile, married couples filing jointly will see their standard deduction rise by $1,800.

For single filers, that brings the full standard deduction to $13,850, while married couples see a standard deduction of $27,700.

"It's a win-win for both the IRS and taxpayers," Alex Beene, a financial literacy instructor for the state of Tennessee, told Newsweek.

Standard deductions are intended to rise with inflation—and since inflation has remained stubbornly at 3.1 percent for January, many Americans are still feeling the hit on their grocery, housing and gas prices.

"By adjusting the deduction upwards, the IRS helps ensure that taxpayers' purchasing power is not eroded by inflation," Zack Hellman, the owner of Tax Prep Tech, told Newsweek.

While Americans won't necessarily see the standard deduction show up as a refund, the amount of money you can earn before it becomes taxable will save you money in the long run.

"The extra $900 this year won't necessarily come to you in money back like a refund, but it will help to lower your taxable income and, more importantly, make the process of filing taxes vastly easier," Beene said.

Nearly a decade ago, millions of Americans filed taxes with itemized deductions, which took extra time and energy for both taxpayers and the IRS. That means the extra money in the standard deduction can go a long way, Beene said, as roughly 90 percent of tax filers claim the standard deduction.

"Now, with the overwhelming majority of taxpayers using the standard deduction, it saves time on both ends and just makes more sense for many Americans to use," Beene said.

Generally, renters are quick to take advantage of the standard deduction, since homeowners with mortgage interest and real estate taxes might be more likely to itemize their specific deductions. That means renter taxpayers could benefit more from the adjustment this year.

"Renters now have a larger deduction without the ownership issue," Eric Green, top national tax attorney at Green & Sklarz and owner of The Tax Rep, told Newsweek. "I don't know that it equalizes it but it certainly helps those who don't own a home or financially are blocked out of homeownership."

More Tax Changes This Year

Keep in mind, taxpayers who are age 65 or older or blind can get an extra standard deduction. For the 2023 tax year, the additional amount was $1,850 for single filers and $1,500 for married people.

In addition to its standard deduction rate, the IRS updated its income tax brackets as well. The changes will likely see smaller tax bills.

For example, those filing individually with an income of $44,000 will only be taxed 12 percent, whereas the same taxpayer would have been taxed 22 percent for tax year 2022.

The upcoming tax deadline is April 15, so Americans should make sure their forms are in by that date. The IRS expects more than 128 million returns to be filed before then.