According to the Joint Committee on Taxation, 46.5 million taxpayers opted to itemize deductions in 2017. However, with the introduction of a substantial increase in standard deduction amounts across the board – thanks to the Tax Cuts and Jobs Act – the number of itemizing taxpayers is projected to drastically decrease to a little more than 18 million for the 2018 tax year.
In other words, a whopping nearly 90 percent of the 150 million tax-filing households in the United States will choose to reduce their taxable income with the standard deduction in 2019.
What Does Standard Deduction Mean?
When you go to file your federal income taxes, the Internal Revenue Service gives you a bit of a break by allowing you to deduct a certain amount from your adjusted gross income to help arrive at your total taxable income for the year. This standard deduction, which is available to all taxpayers, automatically lowers the amount of income you will be taxed on.
The amount you’re able to take in standard deduction generally depends on your filing status, age and whether or not you can be claimed as a dependent on someone else’s taxes. However, the federal and some state governments have different standard deductions for blind taxpayers and those age 65 and over.
Standard Deduction: Tax Years 2018 – 2020
Each year the IRS adjusts the standard deduction for inflation, so the figures change annually. For the 2019 tax year (for taxes filed in 2020) the standard deduction amounts for the various filing statuses are as follows:
- Single – $12,200
- Married filing jointly – $24,400
- Married filing separately – $12,200
- Head of household – $18,350
For the upcoming 2020 tax year (for taxes filed in 2021) the standard deduction figures are as follows:
- Single – $12,400
- Married filing jointly – $24,800
- Married filing separately – $12,400
- Head of household – $18,650
However, if you’re filing your 2018 taxes late, the standard deduction increased from 2017 tax year amounts due to the TCJA, and are as follows:
- Single – $12,000
- Married filing jointly – $24,000
- Married filing separately – $12,000
- Head of household – $18,000
Even though determining which standard deduction you qualify for is pretty straight-forward, you can also use the IRS Interactive Tax Assistant tool to help you figure the amount of your standard deduction as this amount is different for certain taxpayers. All you need is your age, your spouse’s age (if you are married) and your filing status. You will also need some basic information including your adjusted gross income.
With this IRS interview, you are walked through the process of determining your standard deduction, and the whole interview should take about 15 minutes, according to the IRS website.
Additional Standard Deductions
The aforementioned standard deduction amounts are for taxpayers who are under the age of 65 and not blind, but the IRS increases standard deductions for certain taxpayers.
For example, for the 2019 tax year, if you were 65 years or older, you get to increase your standard deduction by $1,600 if you file either as single or head of household. If you are married filing jointly, and you or your spouse is 65 years and older, then your standard deduction increases by $1,300. But, if both you and your spouse are age 65 and older, then your standard deduction increases by $2,600, or $1,300 for each spouse.
The IRS also adjusts the standard deduction for blind taxpayers as well, regardless of age, but you must be legally blind. If you are legally blind, and you are filing as a single taxpayer or head of household, then you can increase your standard deduction by $1,600. Married couples filing jointly with one legally blind spouse get to increase their standard deduction by $1,300, but if you and your spouse are both legally blind, then your standard deduction increases by $2,600, or $1,300 for each spouse.
For the 2019 tax year (for taxes to be filed in 2020) the above amounts largely remain unchanged, with two exceptions:
- If you are single and over the age of 65, or
- Legally blind and filing as singly or as head of household, then your increased additional standard deduction has been raised from $1,600 to $1,650.
It’s worth noting, the additional standard deductions apply to each spouse, so if you and your spouse are both blind and over the age of 65, then you qualify for the maximum additional standard deduction.
Standard Deduction vs. Itemizing
Deciding to take the standard deduction or whether you should itemize your deductions really comes down to which option provides you with the most tax relief and lowers your taxable income the most. The IRS informs taxpayers to select the option that gives them the biggest tax break. So, in this case, you may need to run both scenarios and see which is best. If you have a business or are an independent contractor, you likely have more expenses to write off or itemize than an employee who is reimbursed for certain expenditures.
But, because of the new substantially increased standard deduction due to recent tax reform, it isn’t in most taxpayers’ best interest to itemize – including the self-employed. Unless you have more to itemize than the standard deduction, you would be doing yourself a disservice by not reducing your taxable income as much as you could by using the standard deduction.
However, if you do have enough to itemize, such as medical expenses, mortgage interest or other tax deductions, then you certainly should itemize if it reduces your tax bill more than the standard deduction would.
How To Take the Standard Deduction
When you want to take the standard deduction on your federal income tax return, you do so on Schedule A of IRS Form 1040. What you cannot do, however, is take both the standard deduction and itemize; you must choose one or the other.
The IRS has many tax assistant tools and publications that can assist you in not only determining your standard deduction, but also if you should itemize or take the standard deduction. For more information regarding how to take the standard deduction, what exactly it is and whether or not you should itemize or take the standard deduction, refer to the IRS website.
A Note on Tax Year vs. Tax Season
As a result of the significant increase in the standard deduction for the 2018 tax year, more taxpayers are expected to take the standard deduction than in past years – nearly 29 million more households, to be exact. Keep in mind, however, that if you are filing taxes on time in 2020, then you will take the standard deductions released for the 2019 tax year.
Tax year and tax season, although quite similar, are in actuality two different things. The tax year refers to the year you are paying taxes for, and the tax season refers to the time period from January to April when taxpayers are preparing to file their taxes on the previous year’s earnings.
Read More: What Are Above-the-Line Deductions?
- Tax Foundation: Nearly 90 Percent of Taxpayers Are Projected to Take the TCJA’s Expanded Standard Deduction
- Publication 501 (2019), Dependents, Standard Deduction, and Filing Information | Internal Revenue Service
- IRS: How Much Is My Standard Deduction?
- IRS: IRS Provides Tax Inflation Adjustments for Tax Year 2019
- eFile: Federal Standard Tax Deductions 2018
- The Motley Fool: 2019 Standard Deduction – How Much Bigger Did It Get?
- Forbes: IRS Announces 2019 Tax Rates, Standard Deduction Amounts And More
- IRS: Topic Number 501 - Should I Itemize?
- IRS: 2018 Instructions for Schedule A (Form 1040) (2018)
- IRS: Itemized Deductions, Standard Deduction