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Standard Deduction: Definition & How Much It Is

Updated: November 25, 2022

No matter what you do for a living or where you’re located, you might be eligible for certain tax breaks issued by the government. Yet, there can be a lot to consider. Some tax breaks are only available to married couples or single filers and sometimes your age can play a role. 

Plus, you can also choose to itemize some of your tax deductions if that’s the most beneficial option for you. But one of the easiest ways to go about these tax breaks is by claiming the standard deduction. Want to know how it works? Continue reading to learn everything that you need to know.

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    KEY TAKEAWAYS

    • The standard deduction is the total amount of your earned income that’s not subject to being taxed.
    • The standard deduction can be used to help reduce your tax bill as long as you don’t itemize your deductions.
    • The amount of the standard deduction depends on different factors, including your age and filing status.
    • Each year, the standard deduction is adjusted by the Internal Revenue Service (IRS) to account for inflation.
    • Choosing the standard deduction can be an easier option for individuals since there isn’t a need to track each expense.

    What Is Standard Deduction?

    When talking about standard deduction, it refers to how much earned income isn’t taxable, ultimately leading to a reduction in your tax bill. If you don’t itemize your tax deductions, you can take the standard deduction.

    It’s worth noting that the total amount of your standard deduction depends on a few different criteria. These include your age, married filing status, if someone else had you on their tax return as a dependent, and if you are disabled.

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    How the Standard Deduction Works

    One of the greatest things about the standard deduction is the IRS allows you to claim it regardless of your tax situation. For example, if you don’t have tax credits or other qualifying deductions then the IRS won’t question claiming the standard deduction.

    Ultimately, the standard deduction helps reduce the total amount of taxes you have to pay on taxable income. But, you have a choice. You can take either the standard deduction or you can itemize deductions on your tax return—you just can’t do both.

    The IRS provides a list of allowed expenses for itemized deductions to help reduce taxable income.

    If you decide to take the standard deduction, you won’t be able to take advantage of all the other tax deductions and you can’t deduct home mortgage interest. As well, if someone is able to claim you as a dependent on their tax return, the standard deduction will be smaller.

    When to Claim the Standard Deduction

    There are a few things to consider before claiming the standard deduction. It’s worth looking into both the standard deduction as well as your itemized deductions. If your itemized deductions are less than the standard deduction, claiming the standard deduction will save you time.

    And while claiming the standard deduction is often easier than itemizing everything, there can be other expenses to consider. For example, if you have a home equity loan or a mortgage then itemizing expenses can probably save you money since something like mortgage interest isn’t included in the standard deduction.

    Find the appropriate numbers on IRS Form 1098, the mortgage Interest Statement and compare the deductions. If you itemize, you can also deduct property taxes, charitable donations, state income taxes, or sales taxes.

    But if you don’t have many other expenses or you don’t have the time to itemize, claiming the standard deduction can be your best option. With that said, it can always be a good idea to look into both options to see what’s best for your situation.

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    Standard Deduction vs. Itemizing: What’s the Difference?

    Keeping track of all your expenses and ensuring you have accurate records can be time-consuming and tedious. One of the biggest reasons a taxpayer chooses the standard deduction is that it’s easier to manage.

    Plus, the standard deduction is often higher compared to adding up any eligible tax-deductible expenses. This also comes into play with the Tax Cuts and Jobs Act, which caps total state and local tax deductions at $10,000.

    The key difference to consider between itemizing and the standard deduction is that you can’t do both. You must choose one or the other. Essentially, it’s what’s going to work best for your individual financial and tax situation. An itemized deduction option might provide a larger deduction compared to the standard deduction and vice versa.

    Summary

    The standard deduction is a specific amount that you can claim to reduce your total tax bill. The IRS allows anyone to claim the standard deception, even if you don’t have other tax credits or qualifying deductions.

    You can choose to itemize your expenses and deductions yourself or claim the standard deduction, but you can’t do both. Ultimately, it’s your choice to decide which route will provide you with the greatest benefit.

    The total amount of your standard deduction depends on a few criteria. For example, your filing status, your age, if you’re disabled, or if someone else included you on their tax return are all considered.

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    FAQs About Standard Deduction

    Do I qualify for the Standard Deduction?

    Yes, the IRS allows individuals to claim the standard deduction with no questions asked. However, there can be a difference between single filers and joint filers. And your individual tax rate and tax brackets are considered.

    What Other Deductions Can I Claim with the Standard Deduction?

    There can be a wide range of additional deductions you can claim with the standard deduction. These can include educator expenses, student loan interest, and IRA contributions.

    What Will the Standard Deduction Be for 2022?

    If you file as an individual or a married couple filing separately, the standard deduction amount for 2022 is $12,950. For heads of household, this amount increases to $19,400. For a married couple filing together, the maximum standard deduction is $25,900.

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