The standard deduction is a tax benefit that reduces the amount of income tax you are required to pay.
It was designed to simplify the tax-filing process by reducing the number of people who have to itemize deductions.
If you want more information about how it works, read below!
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Who can take the Standard Deduction?
Taxpayers who don’t itemize their deductions on Schedule A can take the standard deduction. Schedule A is used by taxpayers to report certain itemized deductions.
These include medical and dental expenses, home mortgage interest, state and local taxes, charitable contributions, and more.
The standard deduction is a fixed amount that can be subtracted from your gross income. If you choose to claim the standard deduction, you cannot itemize deductions.
If you itemize deductions, you cannot use the standard deduction when you file your federal income tax return.
The IRS provides a list of amounts and tax brackets for calculating the standard deduction rate each year. The current year’s dollar amounts are listed on Publication 501.
How much is the standard deduction?
In tax year 2022, the standard deductions are as follows:
- For single filers: $12,950.
- For married filing jointly: $25,900. (This is double the amount of what a single filer would have.)
- For head of household filers (who must be unmarried): $19,450.
What are some of the benefits of taking the Standard Deduction?
The are a few key benefits:
- It’s easy to calculate – you simply take a fixed deduction amount based on your filing status
- It saves time – you don’t have to itemize each of your deductions
- It can reduce your chances of being audited – since you’re not itemizing, there’s less information for the IRS to review
The standard deduction was increased as part of the Tax Cuts and Jobs Act of 2017
The standard deduction was increased as part of the Tax Cuts and Jobs Act of 2017. For 2018 returns, the standard deduction was:
- $12,000 for singles and married persons filing separately.
- $24,000 for heads of household.
- $24,000 for married couples filing jointly or surviving spouses.
The amount increases if you are blind or age 65 or older at the end of the year.
The increased standard deduction is only for tax years 2018 through 2025
In the simplest terms, the standard deduction is a deduction that’s available to all taxpayers. It’s subtracted from your adjusted gross income (AGI) to arrive at your taxable income.
It isn’t exactly the same for everyone: it varies based on your filing status and whether you’re eligible for other deductions or credits as well.
The increased amount is only in effect for tax years 2018 through 2025 and was introduced by the Tax Cuts and Jobs Act of 2017 (TCJA).
This law also doubled individual filers’ basic personal exemptions ($4,050 per person), which means you could get up to $12,200 more in tax breaks if you qualify for both increases!
The Internal Revenue Service will likely continue raising these limits each year until 2025, when all taxpayers have hit the new cap of $15,000 for single filers (up from $6300) and married filers (up from $9200).
A higher standard deduction will reduce taxable income
The standard deduction is the amount that can be subtracted from your income before calculating your taxable income.
- For tax year 2022, the standard deduction for married couples filing jointly increases by $800, reaching $25,900.
- In 2022, the standard deduction for single taxpayers and married filing separately will increase by $400 to $12,950.
- The standard deduction for heads of household will increase by $600 to $19,400.
- Taxpayers who are at least 65 years old or blind will be able to claim an additional standard deduction of $1,400 ($1,750 if using the single or head of household filing status).
The standard deduction is a flat amount (meaning it doesn’t change based on your income), so if you have a large number of deductions in other areas (like medical expenses) you may end up paying a higher tax rate than someone else with the same number of deductions.
How to Claim the standard deduction
When you file your taxes, you can choose either to take the standard deduction or to itemize deductions.
If you do not have any deductions outside of the standard deduction (such as medical expenses or mortgage interest), then it makes sense to take the higher amount.
However, if your itemized deductions would be greater than $12,950 for single filers and $25,900 for married couples filing jointly, then claiming that amount instead will give you a bigger tax break.
When you claim this deduction, you are not allowed to itemize deductions on your return.
The IRS has increased the standard deduction since 2011 to keep up with inflation and ensure taxpayers can deduct more from their taxable income due to inflation-based increases.
