How Does the Standard Deduction Work?

Kelly Hernandez
A close up of a person filing their taxes, using a calculator to determine their standard deduction.
Reading Time: 4 minutes

When it’s time to file your taxes, there are a few important decisions to make when it comes to maximizing your tax return. One of the most important of these is the decision whether to itemize your deductions, or to take advantage of the standard deduction. If you have a lot of itemizable expenses, you may be able to save by listing them individually and reducing your overall tax burden. For most people, however, the standard deduction represents the better deal.

The standard deduction is the portion of your income that isn’t taxed by the IRS. If you make an amount under the standard deduction, you won’t be subject to any income tax. Any amount you make over the standard deduction is subject to income tax. The standard deduction depends on your age and your filing status, including whether you’re married, the head of a household, or supporting dependents.

The standard deduction increases each year to keep up with inflation. In recent years, the Tax Cuts and Jobs Act has increased the standard deduction even further, making it a better deal than itemizing for many taxpayers. So is a standard deduction right for you? It all depends on your specific tax situation, your overall earnings, and how many other expenses you can deduct.

2019 Standard Deduction

The standard deduction varies depending on your age and filing status. In 2019, if you’re single or married but filing separately, the standard deduction is $12,200. If you’re married filing jointly or a qualified widow or widower, the standard deduction is $24,400. If you’re a head of household, the standard deduction is $18,350. Individuals who are 65 or older or who are blind have slightly higher standard deductions.

2020 Standard Deduction

In 2020, the standard deduction will increase in order to keep pace with inflation. Taxpayers who are single or married but filing separately have a standard deduction of $12,400. For those who are married filing jointly or a qualified widow or widower, the standard deduction will increase to $24,800. If you’re a head of household, the standard deduction will increase to $18,650.

Standard Deduction vs. Itemized Deductions

The standard deduction and itemized deductions are two different ways to claim a deduction on your tax return. In both cases, these deductions reduce the amount of your yearly earnings that are subject to income tax, thereby reducing your tax burden.

In many cases, the standard deduction is the better deal, especially if you don’t have itemized deductions that exceed the standard deduction. Another benefit to choosing the standard deduction is that you don’t have to keep track of as many itemized expenses throughout the year, which can save you a record-keeping headache come tax time.

In some cases, however, itemizing your deductions can save you more money than claiming the standard deduction. This is often the case if you have a large number of eligible deductions. Common expenses that can be deducted include charitable giving, medical expenses, property taxes, and even gambling losses. Depending on your specific tax situation, the amount of expenses that you’re able to deduct may be greater than the standard deduction. In these cases, itemized deductions will get you the better tax break.

What Factors Affect the Standard Deduction?

There are a variety of different factors that determine what standard deduction you’re eligible for. Marital status is one of the most common situations that increases the standard deduction. Age, disability, and becoming the head of a household can also give your standard deduction a boost. If you’re unsure what standard deduction you’re able to claim, a tax professional can help you to get the most out of your tax refund.

TCJA and Standard Deductions

The Tax Cuts and Jobs Act, sometimes known as the TCJA, was passed by President Trump in 2017. The legislation nearly doubled the size of the standard deduction, from $6,350 in 2017 to $12,000 in 2018. In 2019, the standard deduction increased to $12,200. In many cases, this means that taxpayers who previously itemized their deductions on their tax return now get a better deal if they choose to claim the standard deduction.

While the Tax Cuts and Jobs Act raised the standard deduction, it also limited several other kinds of deductions. Deductions for state and local taxes are now capped at $10,000, while the home mortgage interest deduction has been lowered and only applies to mortgages totalling up to $750,000.

Other deductions have been eliminated entirely, such as the casualty and theft loss deduction and most miscellaneous deductions for employee business expenses. Because of these changes, many taxpayers may find it simpler and more cost-effective to opt for the standard deduction.

Standard Deductions for Married Couples

There are a few things to keep in mind when it comes to the standard deduction if you’re filing taxes as a married couple. If you’re married but filing separate returns, both spouses must either claim the standard deduction or choose to itemize their deductions.

If you’re not sure which option provides you with the better deal on your tax return, it’s a good idea to prepare your taxes both ways to determine which method is more advantageous. Depending on your specific tax situation, you should also decide whether it’s better to file your tax returns jointly or separately.

Standard Deductions for Dependents

Dependents can claim varying amounts when it comes to the standard deduction. You can be claimed as a dependent if you are a qualifying child or relative of a taxpayer and you don’t contribute to more than half of your living expenses over the course of the previous year.

In 2019, the standard deduction for dependents is limited to either $1,100 or an individual’s earned income plus $350, whichever is more. Neither of these can exceed the standard deduction for a single individual of $12,200.

Do You Qualify for the Standard Deduction?

Almost all taxpayers who earn income in the United States qualify for the standard deduction. Some exceptions include individuals who are non-resident aliens and married individuals filing separately whose spouse chooses to itemize. In most cases, however, taxpayers will qualify for the standard deduction.

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