View IRS income tax brackets for single, married and head of household filings.
What is a standard deduction?
A standard deduction is a dollar amount that reduces the bottom-line income on which you are taxed. The amount of your standard deduction depends on your filing status, age, whether you are disabled or if you can be claimed on someone else’s tax return. The standard deduction only can be claimed if you do not itemize deductions on your return.
The primary reason taxpayers choose to take the standard deduction rather than itemize deductions on their tax return is that they do not want to keep track of deductible expenses throughout the year.
Many taxpayers simply do not have enough itemized deductions to make record keeping worth the time and find that the standard deduction is generous enough to skip itemization.
Generally, taxpayers choose to itemize or take the standard deduction based on whichever lowers their tax burden the most. A Tax Foundation report found that 30.1 percent of households itemize their deductions, while 68.5 percent take the standard deduction. An additional 1.6 percent of households had zero or negative adjusted gross income and were unable to take deductions.
For the 2017 tax year, the standard deduction was as follows:
Married Filing Jointly: $12,700.
Married Filing Separately: $6,350.
Head of Household: $9,350.
Qualifying Widow(er): $12,700.
In addition, if you are blind or age 65 or older, your standard deduction increases. It goes up by $1,550 if you are single or head of household and by $1,250 if you are married or a qualifying widow.
There are three distinct advantages to taking the standard deduction:
1. It allows you a deduction, even if you have no expenses that qualify.
2. It allows you to avoid the record keeping required if you itemized and were audited by the IRS.
3. It eliminates the need to track things like medical expenses or charitable donations, particularly if those were minimal.
Example of the standard deduction
The number that is most important on your tax return can be found at the bottom of the first page. It is called adjusted gross income (AGI). Everything that happens with your taxes is based upon that AGI number, from how much tax you owe to whether you qualify for particular deductions, tax credits and other programs.
Say you are married and filing jointly. Your income for the year, including wages, tips, interest payments, and other sources is $60,000. Because the standard deduction for a married couple filing jointly is $12,700, your AGI would be lowered to $47,300.
That means that instead of owing tax on the full $60,000, you would pay federal taxes only on an adjusted gross income of $47,400. If you live in a state that requires you to file annual income tax returns, you also will pay less state tax due to the lower AGI amount. Also, the lower your adjusted gross income is, the more tax credits you will receive.
Deciding to take the standard deduction does not mean that you have skipped out on saving money on your taxes. Those who opt to take the standard deduction are still eligible for what is often referred to as “above-the-line deductions.” The IRS calls them “adjustments,” but they serve the same role as deductions.
Even if you take the standard deduction, you still can have expenses subtracted from your gross income, leaving you with a more tax-friendly AGI. They include:
- Educator expenses.
- Certain business expenses.
- Health savings account deductions.
- Moving expenses, if you relocated for your job.
- Self-employment tax.
- Self-employment retirement plans.
- Self-employment health insurance.
- Penalty on early withdrawal of savings.
- Alimony paid.
- Individual retirement account deductions.
- Student loan interest.
- Tuition and fees.
- Domestic production activities.
- Any jury pay turned over to your employer.