Are you overwhelmed by the many tax terms that come up when you do your taxes? One term that might confuse or even intimidate you is the standard deduction. It’s incredibly important but can prove confusing if you don’t know the basics.
Read on to learn more about the standard deduction and how it works.
Introducing the Standard Deduction
The standard deduction is a set amount of money that reduces your taxable income. Think of it as a little gift from the government for being a responsible taxpayer.
But why should you care? Well, it can save you a lot of money! Instead of spending hours calculating every possible tax deduction, you can opt for the standard deduction and move on with your day. It’s a quick and easy way to lessen your tax burden.
Keep in mind, the standard deduction doesn’t include certain deductions such as unreimbursed medical expenses or miscellaneous itemized deductions. To deduct these expenses from your taxable income, you must itemize your deductions.
Also good to know: There are federal and state standard deductions but we’re only focusing on the federal deduction in this article. You can find your state standard deduction by going to your state’s taxing authority website.
Benefits of Claiming the Standard Deduction
Claiming the standard deduction can offer a multitude of benefits. Not only does it simplify the tax filing process, but it can also potentially lower your taxable income, resulting in a smaller tax bill or a higher refund. You don’t have to do anything to claim the standard deduction- if you don’t itemize your deductions, you’ll get the standard deduction by default.
Plus, with the recent changes to the tax law, the standard deduction has increased, making it an even more appealing option for many taxpayers.
While itemizing deductions may be the best choice for some individuals, claiming the standard deduction can be a stress-free and beneficial opportunity to consider when filing your taxes.
How to Calculate your Standard Deduction
Your standard deduction is a set amount that the IRS sets every year. The exact figure will depend on a few factors, such as your tax filing status and whether or not you qualify for any additional deductions. To calculate your standard deduction, simply consult the IRS guidelines or use reliable tax software to automate the process.
2024 Standard Deduction Amount
In 2024, the standard deduction for:
- Single taxpayers is $14,600
- Married filing jointly is $29,200
- Married filing separately is $14,600
- Head of households it’s $21,900
For those who are blind or over 65 years of age, you will be able to claim an increased standard deduction based on your filing status.
Who isn’t Eligible for the Standard Deduction
There are some taxpayers who aren’t entitled to the standard deduction. They are:
- A married individual filing as married filing separately whose spouse itemizes deductions
- An individual who was a nonresident alien or dual status alien during the year
- An individual who files a return for a period of less than 12 months due to a change in their annual accounting period
- An estate or trust, common trust fund, or partnership
For more details about who can’t take the standard deduction, read this article from the IRS.
Alternative to the Standard Deduction
If you can’t take the standard deduction then consider itemizing your deductions. This involves keeping track of all the deductible expenses you incurred throughout the year, such as medical expenses, charitable donations, and property taxes. To itemize, you must file Form 1040 and attach Schedule A.
Itemizing deductions may be beneficial if you have a lot of deductible expenses and it can potentially lower your taxable income. However, in some cases, the standard deduction amount is higher than the total of all itemized deductions, so taking the standard deduction could save you more money.
Standard Deduction FAQ
Can I take the standard deduction if I’m self-employed?
Yes, you can take the standard deduction even if you’re self-employed. It is important to note that if you are self-employed, you may also be eligible to take additional deductions for expenses related to your business, like the self-employed health insurance deduction or the home office deduction.
Does adjusted gross income include standard deduction?
No, adjusted gross income does not include the standard deduction. Adjusted gross income is your total taxable income after any adjustments or deductions have been made. The standard deduction is a fixed amount that can be used to reduce your taxable income, which may lower the amount of tax you owe. However, it does not count towards your adjusted gross income.
What is the extra standard deduction for seniors over 65?
The standard deduction for those over age 65 in 2024 increases by a set amount based on the following factors:
- Single or Head of Household- 65 and older OR blind- $1,950
- Single or Head of Household- 65 and older AND blind- $3,900
- Married Filing Jointly or Married Filing Separately- 65 and older OR blind- $1,550
- Married Filing Jointly or Married Filing Separately- 65 and older AND blind- $3,100
The increase is per person who meets the criteria. For example, if you’re married filing jointly and one person is over the age of 65 and one person is over the age of 65 and blind, your standard deduction will look like this:
| Married Filing Jointly- Standard Deduction | $29,200 |
|---|---|
| Person #1: Over 65 | + $1,550 |
| Person #2: Over 65 and blind | + $3,100 |
| Total standard deduction | $33,850 |
What is the standard deduction for married filing jointly?
The standard deduction for married filing jointly in 2024 is $29,200.
Can you take the standard deduction and itemize?
No, you cannot take the standard deduction and itemize at the same time. You must choose one or the other for your tax return. If your itemized deductions exceed the amount of the standard deduction, it may be beneficial to choose to itemize. Otherwise, if your itemized deductions are less than or equal to the standard deduction amount, you should go with the standard deduction.
How does the standard deduction differ from the personal exemption?
The standard deduction is an amount that taxpayers can subtract from their taxable income as a way to reduce their tax liability. The personal exemption is a specific dollar amount that taxpayers can deduct for each person listed on the tax return (including yourself and any dependents).
However, the personal exemption was eliminated by the Tax Cuts and Jobs Act and in 2023 the personal exemption amount is $0.
Can I take the standard deduction if I’m a dependent?
No, you cannot take the standard deduction if you are a dependent. Dependents must claim their own personal exemption and may also qualify for additional credits or deductions. Additionally, dependents are not eligible to itemize deductions.
Key Takeaways
- The standard deduction is a set amount of money that reduces your taxable income.
- It saves time and simplifies the tax filing process by avoiding the need to calculate every possible deduction manually.
- It doesn’t include certain deductions such as unreimbursed medical expenses or miscellaneous itemized deductions.
- Claiming the standard deduction can reduce your taxable income and potentially result in a smaller tax bill or higher refund.
- The standard deduction amount varies depending on factors such as tax filing status and additional deductions that qualify.
- For those who can’t take the standard deduction, they can consider itemizing and filing Form 1040 and attach Schedule A.
- The self-employed can still take the standard deduction and may be eligible for additional deductions for business-related expenses.
When it comes to taxes, the most important thing is being strategic and maximizing your deductions as much as possible. The standard deduction is one way to go about doing your taxes, giving you peace of mind that all of your bases are covered.