Insights

What is Standard Deduction?

A Standard Deduction is a fixed or specific amount, determined by the Internal Revenue Service (IRS), that you can deduct from your Adjusted Gross Income (AGI), no questions asked, to arrive at your Taxable Income.

This is purely optional as you can opt for “Itemized Deductions” if that would help you lower your Taxable Income or your Tax Bill more significantly than Standard Deduction. We will be talking more about Itemized Deductions in greater details in our forthcoming blogs.

Standard Deduction is essentially a Flat Amount that lowers the amount of Tax that an individual has to pay to the IRS.

Variations In Standard Deduction

Standard Deduction is basically a “Flat Rate” that you can deduct from your AGI is adjusted each year by the IRS to help you combat inflation.

Standard Deduction varies considerably according to the following:

• Your “Filing Status”

• Whether you are 65 or older

• Whether you are visually impaired

• Whether another Tax Payer can claim you as a dependent

Who is not eligible for Standard Deduction?

The following groups of individuals are those not eligible for claiming Standard Deduction:

• If you are married but filing separately but your spouse opts to “Itemized Deductions”.

• A person who is a Non Resident Alien or a Dual Status Alien during that particular “Taxable Year”.

• An individual who files their Tax Return for a period of less than 12 months due to change in their annual accounting period. (We will be addressing this is greater details in our forthcoming blogs).

• Estates, Trusts, Common Trust Funds and Partnerships.

Exceptions To Those Not Eligible To Claim

Exceptions to Rule No 1 of those not eligible to claim:

• Non Resident Aliens married to US Citizens or Resident Aliens at end of Tax Year who elect to file jointly with their spouses to be treated as a US Resident for the entire year.

• Non Resident Aliens at the beginning of the Tax Year who become a resident or get naturalized by the end of the Tax Year who elect to file jointly with their spouses to be treated as a US Resident for the entire year.

• Students and business apprentices from India according to the United States-India Income Tax Treaty.

Standard Deduction For Tax Year 2024

Now let’s get to Standard Deduction for the Tax Year 2024. The Tax Year 2024 adjustments described below generally apply to Income Tax returns filed in 2025.

• The Standard Deduction for married couples filing jointly for tax year 2024 amounts to $29,200.

• For single taxpayers and married individuals filing separately, the Standard Deduction amounts to $14,600.

• For heads of households, the Standard Deduction will be $21,900 for tax year 2024.

Standard Deduction For Tax Year 2025

Standard Deduction for the Tax Year 2025. The Tax Year 2025 adjustments described below generally apply to Income Tax returns filed in 2026.

• The Standard Deduction for married couples filing jointly for tax year 2025. amounts to $29,200.

• For single taxpayers and married individuals filing separately, the Standard Deduction amounts to $30,000.

• For heads of households, the Standard Deduction will be $22,500 for tax year 2025.

Let’s Talk About Dependents

Who are Dependents:

Dependents are either a qualifying child or a qualifying relative of the taxpayer. Any person you support who lives with you over half the time can qualify as your dependent for tax purposes. This includes not only your children but other relatives as well. Even friends, distant relatives, and domestic partners can qualify as dependents if they're members of your household.

Certain adults can be claimed as dependents as well like full time students under the age of 24, anyone permanently disabled and parents that you support. Anyone living under you whose gross income is less than $4700. If they get more than half of their financial support from you, they don’t have to necessarily live with you.

Standard Deduction For Dependents

If you can be claimed as a dependent by another taxpayer, your Standard Deduction for 2024 is $1300 or your earned income plus $450 (but the total can't be more than the basic Standard Deduction for your filing status).

If you can be claimed as a dependent by another taxpayer, your Standard Deduction for 2025 is $1350 or your earned income plus $450 (but the total can't be more than the basic Standard Deduction for your filing status).

When Standard Deduction Is More Than Income

What if your Standard Deduction is more than your income?

If your Standard Deduction is more than your earned income, then you have ZERO tax liability and you will be refunded any Federal Income Tax withholding. You may also qualify for Earned Income Tax Credit (EITC). We will talk more about this in our forthcoming blogs.

With Tax Season 2025 at our threshold, contact us for your Tax Filing needs,