What is the standard deduction for a dependent

Taxpayers can claim a standard deduction when filing their tax returns, thereby reducing their taxable income and the taxes they owe. In addition to the regular standard deduction, taxpayers can claim an additional deduction if they or their spouse are 65 or older or blind.

Rather than taking the standard deduction, taxpayers can choose to itemize their deductions. In the past, about 70 percent of taxpayers chose to take the standard deduction. Most chose it because it was larger than the itemized deductions they could claim, but some did so because it was easier than identifying and totaling the expenses they could itemize or because they did not realize that itemizing would reduce their tax liability.

The Tax Cuts and Jobs Act (TCJA) increased the standard deduction amounts for 2018 well beyond what they would have been in that year, raising the deduction from $6,500 to $12,000 for singles, from $13,000 to $24,000 for married couples, and from $9,550 to $18,000 for heads of household. The additional deduction for those 65 and over or blind is $1,300 in 2018 ($1,600 if the person is unmarried and not filing as a surviving spouse). As under prior law, the deduction amounts are indexed for inflation.

The standard deduction amount in 2020 is $12,400 for single filers, $24,800 for married couples, and $18,650 for heads of household. The additional deduction for those 65 and over or blind is $1,300 ($1,650 if the person is unmarried and not filing as a surviving spouse).

By raising the standard deduction together with other restrictions on itemized deductions, TCJA will increase the percentage of taxpayers who will take the standard deduction. The Urban-Brookings Tax Policy Center estimates that about 90 percent of households will take the standard deduction rather than itemizing their deductions in 2018.

The Effect of TCJA on Taxable income Thresholds

Before 2018, taxpayers could also claim a personal exemption for themselves and their dependents in addition to the standard deduction. Together, the standard deduction and personal exemptions created taxable income thresholds, ensuring that taxpayers with income below those thresholds would not pay any income tax.

For example, in 2017 the standard deduction was $12,700 for a married couple, $6,350 for a single filer, and $9,350 for a head of household; each personal exemption was $4,050. Thus, the taxable income threshold for a married couple without dependents was $20,800 (the standard deduction plus two personal exemptions) and the threshold for a single person was $10,400 (the standard deduction plus one exemption). Couples and singles with income below those amounts did not owe any income tax.

TCJA raised the stand deduction but also set the personal exemption amount, which would have been $4,150 in 2018, to zero. The loss of personal exemptions offset some of the gain from higher standard deductions, but the net result was a small increase in the taxable income threshold for both singles and couples. Because most of the individual income tax provisions of TCJA expire after 2025, the taxable income thresholds will revert to what they would have been under prior law unless Congress extends or makes permanent current law.

The zero personal exemption amount also applies to the exemptions taxpayers could claim for each of their dependents. However, TCJA also increased the child tax credit, which offset the loss of personal exemptions for many taxpayers with dependents. In many cases, taxpayers with income above the taxable income thresholds can still pay no income tax if they qualify for tax credits such as the child tax credit and the earned income tax credit.

For tax purposes, a standard deduction is the dollar amount that taxpayers can deduct from their income before income taxes are applied. The Internal Revenue Service (IRS) permits taxpayers to deduct this amount from their taxable income in lieu of having to itemize deductions.

Although the standard deduction seeks to simplify some of the complexities of your tax returns, a host of factors should be considered before choosing between deductions. The standard deductions for 2021 and 2022 are different, and your eligibility to take the standard deduction depends on factors unique to your finances.

How standard deductions work

The standard tax deduction provides taxpayers a specific dollar amount of income they can subtract from their earned income on their federal tax return. 

By using the standard deductions, a taxpayer could fall into a lower tax bracket and thus have a lower tax liability at the end of the year. You may drop into a lower tax bracket, depending on how much the standard deduction reduces your adjusted gross income (AGI). This can translate into a lower income tax percentage on your return, potentially reducing the amount you pay when you calculate taxable income.

Your tax bill is determined by your tax rate, tax credits and other factors that will affect how much you owe. Bear in mind that standard deductions apply to the given tax year, not the filing year.

Standard deduction vs. itemized deduction

It's important to understand the difference between a standard deduction and an itemized deduction, so you can make the best choice for your own financial situation.

A standard deduction is the set amount determined by the IRS for qualifying taxpayers in the given tax year, based on your filing status. Conversely, for itemized deductions, you have to list out what you spend on your tax returns. This figure is wholly based on your own spending.

Many filers choose the standard deduction, but others may opt for an itemized deduction and send in a Schedule A IRS form alongside their Form 1040 or 1040-SR. The decision to proceed with standard versus itemized deductions should be made after evaluating your situation with a financial professional. 

What is the standard deduction for 2021 and 2022?

Standard deductions vary depending on your filing status, meaning married couples, single filers and qualifying widows each have their own deduction for income tax purposes. The table below breaks down deductions by filing status and tax year, according to the IRS.

Deductions differ depending on marital status, how you decide to file (if married or as head of  household) or if you’re a qualifying surviving spouse.

Additional standard deductions

Different standard deductions on your federal income tax depend on age and vision too. Those who are 65-plus years old or blind and are married or a surviving spouse may be eligible for an additional standard deduction of $1,350 (for 2021 taxes) and $1,400 (for 2022 taxes). Those who are 65 or older and are unmarried, and are not a surviving spouse, may be eligible for a standard deduction of $1,700 (2021 taxes) and $1,750 (2022 taxes). 

Standard deductions for dependents

The standard deduction for dependents is limited to either $1,100 or the dependent's earned income plus an additional $350, whichever figure is greater. Dependents who earn more than certain financial limits are also responsible for submitting their own tax filing with the IRS, although you may still be able to claim them on your tax return. 

Final thoughts

When deciding between standard deductions or itemized deductions, consider your personal finances. You may prefer a standard deduction if your taxes are straightforward.

If you had large uninsured medical or dental expenses; paid mortgage interest or real property taxes on their home; or made large contributions to qualified charities during the tax year, you may consider itemizing, as the standard deduction curtails your ability to deduct against these costs.  

When in doubt, reach out to a financial expert for an in-depth review of your financial goals, so you can be prepared for tax season.