The standard deduction is a fixed amount you can subtract from your taxable income, reducing the portion that’s taxed. It’s a simpler alternative to itemizing deductions—less paperwork, fewer calculations, and a faster filing process. The amount depends on your filing status and is adjusted each year for inflation.
Why does the standard deduction matter?
It makes tax filing easier. Instead of tracking every deductible expense, you claim a set amount, saving time and effort. But that’s not the only reason it’s important:
- Instant Tax Savings: Lowers taxable income, reducing the taxes you owe.
- Fairness: Helps lower-income earners by making sure part of their income isn’t taxed.
- Economic Boost: Puts more money in people’s pockets, encouraging spending and economic growth.
- Fewer Errors & Audits: A straightforward process means fewer mistakes and less risk of an audit.
For most people, the standard deduction results in a bigger tax break than itemizing, making it the smarter choice.
How is the standard deduction calculated?
Your deduction amount depends on your filing status:
- Single
- Married filing jointly
- Married filing separately
- Head of household
If you’re 65 or older or legally blind, you qualify for a higher deduction. The IRS updates these amounts each year for inflation, and tax law changes can also impact deduction amounts, which affects your taxable income.
Standard deduction example
Say you’re single and under 65 in 2023. Your standard deduction is $13,850. If you’re 65 or older, it increases by $1,850, bringing it to $15,700. That means instead of paying taxes on your full income, you subtract that amount first—lowering your taxable income and cutting your tax bill.