Business, Legal & Accounting Glossary
A standard deduction is an amount of income that can be deducted from a taxpayer’s adjusted gross income (AGI). The amount of standard deduction is not subject to taxes so applying the standard deduction will reduce a taxpayer’s tax liability. Taxpayers have to choose between using standard deduction or itemized deduction, they cannot use both in a same tax year. Taxpayers like to use standard deduction for several reasons. First, by using a standard deduction and not an itemized deduction, a taxpayer does not need to keep records of all tax-deductible expenses. Second, for most taxpayers, the amount of standard deduction is often greater than the deduction they would get if they itemized expenses that are tax-deductible. The amount of standard deduction will depend on the filing status of the taxpayer, whether the taxpayer can be claimed as a dependent on another taxpayer’s return, the age of the taxpayer, or whether the taxpayer is disabled. The amount of standard deduction changes every tax year and is inflation-adjusted.
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This glossary post was last updated: 5th February, 2020 | 0 Views.