The tax code allows you to effectively put some of your income aside tax-free to help meet your living expenses. It offers two options for reducing your taxable income: the standard deduction and itemized deductions.
What Is the Standard Deduction?
You can deduct the amount of the tax year's standard deduction from your taxable income on line 12 of your 2020 Form 1040 tax return. It’s a set number that doesn’t take much in the way of your personal circumstances into consideration.
There are five standard deductions, based on your filing status and whether you're married:
- Married filing jointly
- Married filing separately
- Qualifying widow(er)
- Head of household (single but with one or more dependents)
All of these statuses have different qualifying rules, standard deductions, tax rates, and credit and deduction eligibility.
Taking the Standard Deduction vs. Itemizing
Claiming the standard deduction is much easier than itemizing; it’s just a matter of filling a predetermined deduction amount. Alternatively, you can add up everything you spent on qualifying tax-deductible expenses over the year, such as medical expenses and charitable giving, then subtract the total from your income instead.
Many taxpayers have found that the standard deduction amount offers a bigger deduction than all their itemized deductions combined. In 2019, the Tax Foundation estimated that only about 13.7% of taxpayers would itemize their taxes during their 2020 filing.
How Much Is the Standard Deduction?
The standard deduction you qualify for depends on your filing status, your age, and whether you're blind. The numbers are adjusted each year to keep pace with inflation, and the TCJA virtually doubles them for each filing status, at least through 2025, when the law will potentially expire.
The IRS offers an interactive tool to figure out how much you're entitled to if you're not sure of your filing status. It takes about 15 minutes to complete. These are the standard deduction amounts for each filing status for 2020, the tax return you'll file in 2021:
|Filing Status||Deduction Amount|
|Head of Household||$18,650|
|Married Filing Jointly||$24,800|
|Married Filing Separately||$12,400|
Special Adjustments for Standard Deductions
These across-the-board numbers based on filing status can be tweaked somewhat for some taxpayers, and other rules determine who can claim the standard deduction as well.
The Standard Deduction Based on Age or Blindness
Taxpayers who are age 65 and older, and individuals who are legally blind receive an additional standard deduction. It's calculated by adding the taxpayer's standard deduction based on their filing status, plus an additional amount.
The additional amount for people who are blind or 65 and older is $1,300 each for married taxpayers in 2020. This increases to $1,650 for unmarried taxpayers and heads of household.
You reach age 65 on the day before your 65th birthday, according to IRS rules.
Special Rule for Married Couples
You and your spouse must both take the standard deduction, or you must both itemize your deductions if you're married but filing separate returns. You can't mix and match, with one spouse itemizing and the other taking the standard deduction.
It usually makes sense to figure your taxes both ways, with each spouse itemizing and each spouse taking the standard deduction, to find out which yields the better overall tax savings.
Standard Deduction for Dependents
Taxpayers who can be claimed as dependents on someone else's tax return have variable standard deduction amounts. As of the 2019 tax year, their standard deduction is limited to either $1,100 or their earned income plus $350, whichever is more. In either case, the deduction is capped at the amount of the standard deduction for their filing status—it can't be more.
The dependent deduction applies to those who are eligible to be someone’s dependent, not just those who are claimed on someone else’s taxes.
The Effect of the Tax Cuts and Jobs Act (TCJA) on Standard Deductions
These changes will make it more difficult to surpass the $24,800 in deductions you'd need to file an itemized return instead of a standard one. You might want to prepare your return both ways—particularly if you think you have a lot of itemized deductions—to make sure that you're getting the greatest deduction possible. Every dollar counts.