The amount an individual pays in federal taxes varies greatly depending on factors like tax bracket, income, and filing status. Deductions are an important part of keeping that bill as low as possible. The most common route is to take the standard deduction, which is a set amount that any taxpayer can use to decrease their taxable income.
What is the standard deduction?
When taxpayers file their federal taxes, they may use certain deductions to lower their taxable income and, as a result, the amount they owe in federal taxes. The IRS offers two choices:
- Using a set amount to reduce taxes, known as a standard deduction, or
- Using a line-item list of eligible tax deductions, known as an itemized deduction.
Taxpayers who opt to take a standard deduction don’t have to provide any kind of documentation when filing their taxes. It’s an automatic deduction based on filing status and dependents. Each year, the IRS sets a new standard deduction amount. It usually increases slightly to account for inflation.
How much is the standard deduction?
Most taxpayers qualify for the standard deduction if they prefer to use it over itemized deductions. The amount that can be claimed depends on the person’s filing status. The following chart shows the standard deduction amount for 2021 and 2022 by tax filing status.
How the standard deduction works
Taxpayers use the standard deduction amount for the tax year they’re filing for, not the current calendar year. For instance, a couple using the standard deduction for married filing jointly on their taxes due in April 2023 would use the 2022 deduction of $25,900 because they’re filing taxes for the previous year’s income.
These standard deduction amounts only apply to federal taxes. Each state has its own way of handling state taxes. Some states don’t charge any income tax at all, while others allow the choice between a standard and itemized deduction. However, the state deductions are usually lower than the federal deduction amounts.
What is an itemized deduction?
Some taxpayers benefit more by itemizing their tax deductions. This means that instead of claiming the standard deduction, they use individual tax breaks to lower their taxable income. Each taxpayer will have a different deduction amount since everyone will have different eligible expenses to deduct.
Here are some common itemized deductions allowed by the IRS:
- Mortgage interest (for the interest on up to $1,000,000 of that eligible mortgage debt, depending on the date of the loan and the taxpayer’s filing status)
- Local and state income taxes (up to a limit)
- Local and state real estate and personal property taxes
- Medical and dental expenses that exceed 7.5% of the taxpayer's adjusted gross income
- Mileage rate of $0.16 per mile when using a vehicle for medical reasons
- Charitable contributions to eligible organizations
- Losses from a federally declared disaster
- Personal protective equipment (PPE) costs related to COVID-19, including masks, hand sanitizer, and sanitizing wipes
Taxpayers usually opt to take itemized deductions when the total exceeds their standard deduction amount. However, one of the drawbacks to itemizing is that taxpayers do need to keep records of any tax deductible expense. In case of an IRS audit, they’ll need to prove that the expenses were legitimate and actually paid.
Standard deduction vs. itemized
Choosing between the standard deduction and itemized deductions is a simple matter of math. When a taxpayer’s itemized deductions exceed the standard deduction amount, it makes sense to itemize. But if a taxpayer doesn’t have a lot of expenses to deduct, it usually makes sense to take the larger standard deduction.
It’s easy to figure this out no matter how taxpayers file, either with DIY tax software or a tax professional. A standard deduction calculator is usually built into any tax software and compares both scenarios to determine which deduction is better. That means a taxpayer usually has to input all of their potential itemized deductions into the software (or in the documents provided to a tax pro), even if they don’t end up itemizing their deductions.
For most people, the big-ticket deductions are related to their homes in the form of mortgage interest and real estate property taxes. For a quick idea of whether itemizing is worth it, a taxpayer could quickly log into their mortgage account and see how much they paid in mortgage interest and property taxes for the year. If those numbers are close to the standard deduction limit, it might be worth calculating all eligible expenses to find the best option.
FAQs about the standard deduction
Who isn’t eligible for the standard deduction?
Not everyone is eligible for the standard deduction. Anyone who falls into one or more of these categories does not qualify:
- A married couple filing separately—when one spouse itemizes, the other may not claim the standard deduction
- A nonresident alien or dual status alien
- A taxpayer whose return is for less than 12 months because of changes to their annual accounting period
- A partnership, estate, trust, or common trust fund
Who qualifies for an additional standard deduction?
Additional standard deductions are available to the following taxpayers:
- Those who are 65 years or older by the end of the tax year
- Those who are legally blind
Taxpayers who fall into both categories may claim two additional deductions.
What is an increased standard deduction?
Certain individuals may qualify for an even larger standard deduction, if they suffered a net qualified disaster loss and choose not to itemize their deductions come tax time. In this case, taxpayers may opt to increase their standard deduction by the amount of that loss, using Schedule A (or Form 1040) to calculate the actual amount of their individual standard deduction.
What is the standard deduction for dependents?
The standard deduction is limited if a taxpayer is claimed as a dependent by another taxpayer. The deduction amount is either $1,100, or their earned income plus $350 (whichever is greater). However, it cannot exceed the standard deduction amount. This scenario often comes into play with older children, like teens in high school or college, who still depend on their parents but also earn their own income.
The bottom line
Taxpayers looking for the lowest federal tax bill possible can compare the standard deduction to their potential itemized deductions each year. There’s no sense in leaving money on the table, even if it takes a little extra effort to add up the itemized expenses.