Standard Deduction

AAA

DEFINITION of '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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. IRS Publication 929: Tax Rules ...

    A document published by the Internal Revenue Service (IRS) that ...
  2. Adjusted Gross Income - AGI

    A measure of income used to determine how much of your income ...
  3. Income Tax

    A tax that governments impose on financial income generated by ...
  4. Inflation

    The rate at which the general level of prices for goods and services ...
  5. Married Filing Jointly

    A filing status for married couples that have wed before the ...
  6. Tax Shield

    A reduction in taxable income for an individual or corporation ...
Related Articles
  1. Calculating The Mortgage Interest Tax ...
    Home & Auto

    Calculating The Mortgage Interest Tax ...

  2. Tax Tips For The Individual Investor
    Retirement

    Tax Tips For The Individual Investor

  3. Present Your Clients With A Year-End ...
    Professionals

    Present Your Clients With A Year-End ...

  4. An Overview Of Itemized Deductions
    Taxes

    An Overview Of Itemized Deductions

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center