What Is the Standard Deduction?
The Internal Revenue Service (IRS) standard deduction is the portion of income not subject to tax that can be used to reduce your tax bill. You can take the standard deduction only if you do not itemize your deductions using Schedule A of Form 1040 to calculate taxable income. The amount of your standard deduction is based on your filing status, age, and whether you are disabled or claimed as a dependent on someone else’s tax return.
- The IRS standard deduction is the portion of income not subject to tax that can be used to reduce your tax bill.
- Not all taxpayers qualify for the standard deduction.
- Most taxpayers who use the standard deduction instead of itemizing do so because they don't have to keep track of qualifying expenses.
Understanding the Standard Deduction
Income tax is the amount of money that the federal or state government takes from your taxable income. It is important to note that taxable income and total income earned for the year are not the same. This is because the government allows a portion of the total income earned to be subtracted or deducted to reduce the income that will be taxed. Taxable income is usually smaller than total income due to deductions, which help to reduce your tax bill.
You can select one of two types of deductions: itemized deductions or the standard deduction. Whichever one you choose is up to you, but you cannot use both. The itemized deduction option allows you to list all your tax-deductible expenses for the year, such as property tax, medical expenses, eligible charity donations, gambling losses, and other costs incurred that influence your bottom line tax figure. Normally, if the total value of itemized deductions is higher than the standard deduction, you would itemize. Otherwise, you should opt for the standard deduction.
2019 Standard Deduction Amounts
For 2019 taxes filed in April 2020 the standard deductions are as follows:
- $12,200 for single taxpayers
- $12,200 for married taxpayers filing separately
- $18,350 for heads of households
- $24,400 for married taxpayers filing jointly
- $24,400 for qualifying widow(er)s
If you are a single tax filer with a gross income of $80,200 for 2019, you can reduce your income by $12,200 to taxable income of $68,000. Your tax bill for income of $68,000 would be $10,905 or an effective tax rate (ETR) of 16.03%. If you paid taxes on the entire $80,000, your bill would be $15,535, or an ETR of 19.42%.
2020 Standard Deduction Amounts
For 2020 taxes filed in April 2021 the standard deductions are as follows:
- $12,400 for single taxpayers
- $12,400 for married taxpayers filing separately
- $18,650 for heads of households
- $24,800 for married taxpayers filing jointly
- $24,800 for qualifying widow(er)s
The new standard deduction amounts, introduced by the Tax Cuts and Jobs Act at the end of 2017 and nearly double the previous amounts, are set to expire Dec. 31, 2025.
The federal income tax system and some states have higher standard deductions for people who are at least 65 years old and for people who are blind. Under federal guidelines, if you are 65 or older and single or a head of household, your standard deduction goes up $1,650 for 2019. If you are married filing jointly and one of you is 65 or older, your standard deduction goes up $1,300. If both of you are 65 or older, the deduction increases by $2,600.
If you are legally blind and single or a head of household, your standard deduction goes up by $1,650. If you are married filing jointly and one of you is blind, your standard deduction goes up $1,300. If both of you are legally blind, the deduction increases by $2,600. To qualify as blind, you must have a certified letter from an eye doctor stating that you have noncorrectable 20/200 vision in your best eye or that your field of vision is 20 degrees or less.
Not all taxpayers qualify for the standard deduction—nonresident aliens and their spouses, married people filing separately whose spouses itemized, and trusts and estates can't take it.
Limits to Standard Deductions
Not all taxpayers qualify for the standard deduction. Among those who cannot claim it are an individual who was a nonresident alien at any time of the year (and that person's spouse, if filing jointly), a married person filing separately whose spouse itemized deductions, an estate, and a trust. And while you can increase your standard deduction by the net amount of a disaster loss, the loss must happen in a federally declared disaster area.
Itemizing vs. Standard Deduction
The biggest reason taxpayers use the standard deduction instead of itemized deductions is that they don’t have to keep track of every possible qualifying expense throughout the year. Also, many people may find the standard deduction amount greater than the total they could reach if they added up all their eligible tax-deductible expenses separately.
This may be especially true given that the 2017 tax bill limited total state and local tax deductions to $10,000. It also limited the mortgage interest deduction on properties bought after Dec. 15, 2017 to loans of $750,000 (it was $1 million under previous rules).