Standard deduction Meaning
Standard deduction is a fixed amount that the Internal Revenue Service (IRS) allows taxpayers to subtract from their adjusted gross income (AGI) to reduce their taxable income. It is a simplified alternative to itemizing various individual deductions, such as those for mortgage interest, medical expenses, and charitable contributions.
Taxpayers can choose between taking the standard deduction or itemizing their deductions, whichever results in a lower tax liability. The standard deduction is designed to provide a straightforward and easy-to-use tax benefit, particularly for individuals with relatively simple financial situations.
The amount of the standard deduction is determined by the taxpayer's filing status (such as single, married filing jointly, or head of household) and can change each tax year. As tax laws are subject to change, it's important to consult the most recent IRS guidelines for the applicable standard deduction amounts.
For example, as of the 2022 tax year, the standard deduction amounts are as follows:
- Single or Married Filing Separately: $12,950
- Married Filing Jointly: $25,900
- Head of Household: $19,400
These figures represent the basic standard deduction amounts, but additional standard deductions may apply for individuals who are blind or over the age of 65. The standard deduction is subtracted from the taxpayer's income, reducing the taxable income on which their actual tax liability is calculated.