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An HR Glossary for HR Terms

Glossary of Human Resources Management and Employee Benefit Terms

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Standard Deduction

What Is a Standard Deduction?

A standard deduction is a fixed dollar amount that taxpayers can use to reduce the amount of their taxable income. They can decide whether to claim the standard deduction or to itemize deductions. The standard deduction allows a taxpayer to take a deduction even if they have nothing to itemize. It also eliminates the need to itemize and reduces the need for keeping expense receipts.

The alternative to taking a standard deduction is to itemize. Itemized deductions are specific expenses incurred during the year, which will decrease your taxable income. You can potentially claim hundreds of itemized deductions. 

Some of the big deductions that can be itemized include:

  • Student loan interest

  • Charitable donations

  • Medical expenses

  • Residential energy

  • Home office

The main advantage of itemizing is that, when added together, the total may equal more than the standard deduction. The main disadvantages are that you need to understand all the rules and limits of each item, you need complete records of each item, and it takes more time to prepare your tax return.

How Much Is the Standard Deduction?

The standard deduction amount varies by year and depends on the following factors:

  • Income

  • Age

  • Filing status

  • Whether or not the taxpayer is blind

  • Whether or not you are married or a qualified widow(er)

However, as of 2020, the standard deduction is as follows:

  • For single or married filing separately: $12,400

  • For married filing jointly or qualifying widow(er): $24,800

  • For head of household: $18,650

  • For single or head of household over age 65 or blind, there is an increase of $1,650.

  • For married or qualifying widow(er) over age 65 or blind, there is an increase of $1,300.

Who Isn’t Eligible for the Standard Deduction?

While 90% of taxpayers will take the standard deduction rather than itemizing when filing their taxes with the IRS, some taxpayers can’t use the standard after-tax deduction. 

Taxpayers who aren’t eligible for the standard deduction include:

  • Someone filing “married filing separately” whose spouse itemizes deductions

  • Someone who files a tax return for a period of fewer than 12 months

  • Someone who was a nonresident or dual-status alien during the year (unless that person is married to a U.S. citizen or resident alien and chooses to be treated as a U.S. resident)

  • An estate or trust, common trust fund, or partnership