Standard Deduction

The standard deduction simplifies tax filing. Instead of tracking and claiming individual deductible expenses, a taxpayer can simply subtract a set amount from their income. The amount usually depends on filing status, such as single or married, and is often adjusted for inflation.

Taxpayers can usually choose between the standard deduction and itemising, which means listing their actual deductible expenses, such as certain interest, taxes, medical costs and charitable gifts. They pick whichever gives the larger deduction.

For example, under a hypothetical system with a standard deduction of 14,000, a taxpayer whose itemised deductions add up to 9,000 would take the standard deduction, because it reduces taxable income by more. Someone with 18,000 of itemised deductions would itemise instead.

The term is especially associated with the US federal income tax system. Many other countries achieve a similar effect through a personal allowance or tax-free threshold, an amount of income on which no tax is charged. Because amounts and rules change regularly, current figures should always be checked.