Standard Deduction


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.

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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  1. Where on my 1040 form do I report AGI (adjusted gross income)?

    On a standard IRS Form 1040, you add up and report adjusted gross income, or AGI, on line 37. Line 37 appears on the first ... Read Full Answer >>
  2. How can I lower my effective tax rate without lowering my income?

    There are lots of ways to lower your effective tax rate, although your individual circumstances determine whether you can ... Read Full Answer >>
  3. Which is better for tax deductions, itemization or a standard deduction?

    Each deduction that you claim may result in a decrease in the amount of taxes that you owe. However, whether you receive ... Read Full Answer >>
  4. Do tax brackets include Social Security?

    A portion of your Social Security benefits may be subject to federal taxation using tax brackets. Your tax bracket is determined ... Read Full Answer >>
  5. Is dental insurance tax deductible?

    Dental insurance premiums may be tax deductible. To be deductible as a qualifying medical expense, the dental insurance must ... Read Full Answer >>
  6. Are personal loans tax deductible?

    Interest paid on personal loans is not tax deductible. If you take out a loan to buy a car for personal use or to cover other ... Read Full Answer >>

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