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:

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.

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How Much Is the Standard Deduction?

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

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

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: