 Income tax 2022-2023 standard deduction software example. Let's do some wealth preservation with some tax preparation. Here we are in our example Form 1040, populating it with LISERT tax software. You don't need tax software to follow along, but if you have access to it, it's a great tool to run scenarios with. You can also access the Form 1040 related forms and schedules at the IRS website, irs.gov, irs.gov. Our starting point here is that we have a single filer up top. Support accounting instruction by clicking the link below, giving you a free month membership to all of the content on our website, broken out by category, further broken out by course. Each course then organized in a logical, reasonable fashion, making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files, and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. This is going to be Mr. Anderson. We have the address down below. We've got no dependence at the starting point, 100,000 on the W2 income just to have a nice round number. And we're focusing down here then on the standard deduction. So here is our focus. The standard deduction will be taken if it's greater than the itemized deduction. The use of the software is nice because it'll allow you to kind of help to do that calculation to help to do that kind of comparison and see which is the larger one. It'll typically take the larger one. The information on the left of the form here tells you what the standard deductions are in general unless you have that added standard deduction. If you're over a certain age 65 and blind, then you can have the alternatives to them. So the single or married filing separately is of course that 12,950. There's the 12,950 here because that is the filing status we're talking about. If we went to married, and this is how I would try to memorize this, the standard deductions will change from year to year. But you want to have a general dollar amount of what the standard deduction is on the single filing. And then when married, you would expect it to double, which it basically does here, to 25,900. So it's that 12,950 goes up to 25,900 for married. Because of course if you're married, got two people together, you don't want to disincentivize people getting married. And therefore you would expect the standard deduction has to double even though you would think that maybe the wages won't exactly double and everything because you might have one of the spouses might be taking care of kids and whatnot and all that kind of stuff. But that is that. And then the head of household of course is in the middle. It's between the 12,950 and the 25,900 at the 1900 and that's the general kind of layout. Married filing separately usually bounces back to that 12,950. Although you have that caveat, if one of the spouses is itemizing, that's going to require the other spouse to kind of follow suit. You can't have one itemizing and one standardizing. So from a practical standpoint, then the question is often going to be, okay, is someone going to itemize or not? Now we'll dive into that. I will dive in, swim around. Itemized deductions later, but if they're nowhere near being able to itemize, then usually it's not worth your time to go through all the itemized deductions because they will be taking the standard deduction. So many more people fall into that kind of category these days because they tried to simplify the code by basically increasing the standard deduction. So basically most people take it. So if we go into the itemized, just to take a look at it, it's on the schedule A and you can see the different categories for itemizing. And these are the types of deductions often coming to mind when you first think about like deductions. You got the medical and dental, you got the taxes you pay like real estate taxes, you've got the interest like the mortgage interest. The gifts to charity charitable contributions and casualty and other deductions down below. Now note the big thing that you're going to ask if people are going to push over from itemizing from standard to taking an itemized is the interest, whether they own a home in other words, do they own a home? If they own a home, then they're probably got a mortgage on it. If they have a mortgage on it, then the interest on the mortgage is the big one that often pushes a lot of people over. And that in conjunction and alignment with the fact that you're going to have property taxes on it as well. So the home will lead to two big items, property taxes and the mortgage interest. And if you're in a state where the homes are much more expensive type of area just because cost of living is higher like California or New York or something, then it's likely that the house is higher in terms of cost, the loans higher and then owning a home can kick people over quite easily. If you're in other parts of the country where there's reasonable prices actually for a home, then the standard deduction is such that you still could find situations where people are taking the standard deduction and you want to really understand that because a lot of times when you talk to like real estate brokers and whatnot, they're going to say, well, you get this big tax benefit, but we'll talk that about more of it when we get into that area. But just realize that the benefit might not be as big as you think because you have to consider the gap between your standard deduction and your itemized deduction. So although you get this big itemized deduction, if your standard deduction was pretty close to it before you might not be getting as much of a difference than you would otherwise think, and you have to actually run a tax projection to figure that out. But we'll talk more about that later. So if you don't know which one they're going to be able to take, you're going to have to collect all the information. Also, if someone got into some bad medical situation, hospital bills and stuff like that, then the medical stuff in and of itself might push someone over, but there's restrictions to the AGI limitations on the medical. So it's usually the home that pushes people over. Okay, so let's get back to the standard deductions here. Here's the $12,950. I could double check that on my little worksheet in Excel where I put $100,000 in for the W2 wages pulling in here. No above the line items. And then the standard deduction is the $12,950. There's the $12,950 in our table. It being pulled from there. And that's going to give us then our $87.50. There's our $87.50. I depend on the tax software to do the calculation of the $14,774. And there's the $14,774. And then we had the tax payment of the $15,000 getting us to the $226. We're mainly focused here on the first half though, which is just the calculation of the income tax. Now let's just have the same income and double it up to being married with the same $100,000 income. So now we're at married filing joint here and we have another spouse. So Mr. Anderson got married, which is nice. And so now we can scroll down and say we got the same $100,000. So note when getting married, it's possible that the incomes could likely double or something like that or at least go up. But it's not required that that would be the case. So let's just keep it at the same $100,000 for now. And then the standard deduction doubles, which is kind of what you would expect to happen, because again, you don't want to disincentivize marriage. Marriage is usually going to be a benefit for the tax codes because of the fact that they're trying to accommodate it as if the two people got together and they both have the same amount of income. You don't expect to make the same amount of money. You double the income because then they basically stubble the standard deduction and they have similar kind of adjustments to the actual tax calculation tables. But again, if you're on the low income side of things, the tax code can actually disincentivize marriage by not allowing some of the things that you might get like with the refundable credits like the earned income tax credit and the child tax credit can get kind of messy. You could imagine situations where it doesn't turn out to be a benefit. So in any case, if I go back to the equation here, all that's happening is now I'm upping the married filing joint to the 25-9. So there's the 25-9 getting us to that 74-1. So the 74-1 on page one is here. And then on page two, the tax calculation is now lower because one, the tax is lower, and also two, we're using different tables for married instead of single. So 8, 8, 4, 8, 4, 8, 4, 8, 4, 8, 4, 8, 4, 8, 4, 8, 4. That would be that. Now you can imagine a situation that if they got married, then the income would double. Again, it's probably not likely that you're going to, you know, that it would double. I mean, maybe, I mean, but usually one spouse earns more than the other. I'm not going to get into who earns more or whatnot. And it might be likely that after marriage, one of the spouses is going to take time, you know, with kids, which means we're not going to be able to work as much, you would think. But let's say that it doubled here to W22 and say we had 100,000 and do that. So if I go back on over, now we've got a 200,000 because now we have two people combined in the married tax return, the 25,900, that gets us to the 174,100. If I mirror that on my little worksheet, I'm going to say this is W22,100,000. And we'll pull that back onto the first page for 200,000, that gets us to the 174,100. And so 174,100. And then on page two, the tax is now 29,536. So 29,536. So there we have that. So again, the key points you just want to remember if you go from married to single to married is you're going to say, well, if they're single, you've got the 12,950, if they were to get married, you're going to double the standard deduction generally. But you have to also consider the fact that you could possibly have two incomes that are coming together, or you can just think of if you're looking at a married couple, that it would be the standard deduction 12,950 times 2,25,900. And there's usually also going to be an impact on the tax calculations because the whole progressive tax tables will have to change for married couple versus single. Okay, let's go ahead of household now. So now I'm going to remove one going back to a single person, but then add a dependent, which is usually the thing that's required to push someone up to a head of household. Okay, so now we're ahead of household here. And so we've got Mr. Anderson. And then you would expect normally, as we talked last time or in a prior presentation, when we ran scenarios for qualifying for a head of household that you would have a dependent as part of the qualifications. Does it necessarily have to be one that qualifies for a child tax credit or anything, but one that would qualify to push someone up to the head of household? So then I'm back to the 100,000 here, and now the standard deduction is at the 1,900, the 1,900. Okay, so if I go back on over and I was just to mirror that in my Excel worksheet, I would delete the second W2 and the standard deduction, I'm going to say is now equivalent to the 1,900, which will bring us down to the 80,600 of the tax. 80,600 page two then calculates the tax at 11,855. So I'm going to say, all right, 11,855. I'm losing my voice again. No, don't go voice. I need you. Okay, it's okay. My voice won't go. My voice loves me. All right, let's do a let's do a qualifying survivor spouse here just to round things out. So now we're at qualifying survivor spouse. We've got the Neo here, Mr. Anderson, and we're going to say remember that the year of death, we're going to say wasn't in the the 2022 but some in the prior year will say for our example, because if the death happened of the spouse in 2022, they would still be married filing joint typically. So but but now it's the year after and they qualify because they have a dependent as well. So they don't bounce back to single but rather or head of household but rather get the beneficial status of the surviving spouse. And so we're still at the 25,900 as opposed to bouncing back to a single file at the 12,950 or head of household. So remember if you're single, if you're unmarried, the best the worst status is filing single because then you get the 12,950 better than that. If you're head of household but you'd need a dependent, better than that would be that you're a qualified widow, widow, were or surviving spouse, whatever they call it now. But obviously you would have to have had a spouse that died, which would be a tragic situation and usually a qualifying dependent in that situation for that to be covered. All right, now let's go back and say that we're over 65. So if they're older than 65, that'll typically bounce us over to using the 1040 SR instead of the standard 1040. But if you're using tax software, you can often still kind of look at the form 1040 because it has the layout that might be a little bit more familiar to you. So if I go to the form 1040 single file or Mr. Anderson, and then we've got the checkbox down here. We're born before January 2, 1958. In essence, over 65, we've got the 100,000. And then down here, we've got the standard deduction is now at the 147. So if I was to kind of review this using my Excel worksheet, I might end up going, okay, this, I would think they were single. But no, the software saying that it should be bumped up here because they're over 65. So I've said, okay, it's going to be this plus that added for single and head of household 1,750 because they bumped up to the 14700. So that gives us to the 85,300. So I can say, okay, 85,300. So that looks good. You can also see that, of course, on the 1040 SR, which has just a little bit different look and feel. U.S. tax return for seniors, single. And down here is the checkbox. We're born before January 2, 1958. So there we have it. And we get down to, so it's a little bit different of a calculation. There's the 147 and there's the 85,300. So the 85,300 that we got to. Now, if you want to find those, because remember that standard deductions are on the first page. If they didn't have those added standard deductions are kind of listed out right here. But if you go to the form 1040 SR and the page four, there's where you have your single standard deduction. And the number of boxes checked, one box is checked. So now you're at that 14700. If two boxes were checked, meaning your single over 65 and blind, then it would be to that 16450. If married, then you've got the married couple. So one box versus two versus three versus four because you could have one spouse be over 65 or two spouses over 65. And both of those spouses could also be blind, right? Those are the four possibilities you have in that situation. Qualifying, surviving spouse and head of household and so on and so forth. So let's add that if they're blind, it's tragic situation here. And we'll up this over and say that they're blind. So now I'm going to go, okay, forms. I like to start at the 1040 just because it's easier for me to see I'm more used to it. And so I can say, okay, now two boxes are checked. You were born before January 2, 1958 and are blind. So now the deduction is going up to 16450. So if I was on my Excel worksheet, I'd say, okay, now there's two of these that were increased to the 16450 to get us to the taxable income income of the 83550. So there's the 83550, which of course you can see on the form 1040 SR as well. So there's the single status and we're going to say on page two, there's the 16450. There's the taxable income, 83550. Now, if we had a married couple, just to see another combination because there's more combos if they're married and they're both over 65 and one of them was blind. Now I'm going to say, okay, so we're born before January 2, 1919. Our blind spouse was born before but not blind. So now we've got the standard deduction at the 30,100. If I go back on over, I would say, okay, normally it would be the married filing joint, but then I'm going to add the 1,400 for one spouse plus 1,400 for the other spouse. Plus 1,400 because one of the spouses were blind. And that's going to get us to the 30,100, getting us to the taxable income of the 699. There's the 699. You can see that on the 1040 SR as well. Married filing joint. There's our checkboxes, three out of four being checked off on page two. Then we can see the 30,100, the 699 there, 699 there. And then again, if I look at page four, now if I was married filing joint, there's the 30,100 because three out of the four kind of added categories have been checked off, both of them over 65, one out of the two blind. And just jumping back to the married filing separate status. I'll remember that if married filing separate, you could have some restrictions. Restrictions. So for example, if I go back to married filing separate and I scroll down, then typically that would take you back down to the standard for the single filer, which is the 12,950, but you could imagine a situation where one of the spouses is itemizing in which case you would have to force the itemizing of this spouse possibly for married filing separate. And that of course can have a big impact on the taxes when you're thinking about what someone can do married filing joint versus a married filing separate. So remember that when you get into the weeds of a married couple and they're like, should we file married filing separate? There's kind of a couple of questions. The one is would it be beneficial from a tax standpoint? Usually it's not usually married filing joint would be better. And then you have other questions that may lead them to want to marry filing joint or separate. And then if one is itemizing that could complicate the situation as well. And if you're living in community property states that also could be different or is different in terms of the calculation from a non community property state. So just make sure that you've got those things kind of straightened out and that someone can't really go from married filing joint just back to single. Married filing separate is not the same as single or jumping back to basically like head of household. There's usually going to be restrictions to married filing separate that may not be there if you were head of household or single filing status. So those are the general concepts.