Standard Deduction

What is a 'Standard Deduction'

A base amount of income that is not subject to tax and that can be used to reduce a taxpayer's adjusted gross income (AGI). A standard deduction can only be used if the taxpayer does not choose the itemized deduction method of calculating taxable income. The amount of the standard deduction is based on a taxpayer's filing status, age and whether he or she is disabled or claimed as a dependent on someone else's tax return.

BREAKING DOWN 'Standard Deduction'

The biggest reason taxpayers use standard instead of itemized deductions is that taxpayers don't have to keep track of every possible tax deductible expense throughout the year. Plus, many people find the standard deduction amount to be fairly generous and usually greater than the total they could reach if they added up all of their tax-related expenses separately. The standard amounts are adjusted for inflation each year.

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