What is the Standard Deduction?
The standard deduction is an amount that a taxpayer is allowed to subtract from their taxable income and is subtracted from their gross income to arrive at a tax basis. The universal standard deduction is the amount of gross income that a taxpayer can subtract from their adjusted gross income, The standard deduction varies by income level.
Some of the big deduction that can be itemized include:
- Student loan interest
- Charitable donations
- Medical expenses
- Residential energy
- Home office
Who Isn’t Eligible for the Standard Deduction?
The Standard Deduction is a personal business deduction that typically reduces taxable income and is taken by most people, Standard Deductions do not affect everyone. The main determining factor is that the taxpayer must have a taxable income of $6,350 or less (and must file a single return).
Standards deductions are necessary in order to have a simplified tax system that encourages compliance and reduces administrative costs. By having a standard deduction, taxpayers are able to reduce their taxable income by a set amount, which results in less tax owed. This deduction also results in fewer taxpayers itemizing their deductions, which further simplifies the tax filing process.