Standard Deduction

The standard deduction is one of the most widely used provisions in the U.S. tax code. Rather than tracking and documenting every potentially deductible expense throughout the year, taxpayers who claim the standard deduction simply subtract the applicable flat amount from their adjusted gross income before calculating their tax liability. The result is called taxable income, which is the figure to which ordinary income tax rates are applied.

The Tax Cuts and Jobs Act of 2017 (TCJA) roughly doubled the standard deduction, leading to a significant increase in the percentage of taxpayers who claim it instead of itemizing. The IRS adjusts the standard deduction annually for inflation. For 2025, the amounts are $15,000 for single filers, $30,000 for married filing jointly, $22,500 for heads of household, and $15,000 for married filing separately.

Additional standard deduction amounts are available for taxpayers who are age 65 or older or who are legally blind. For 2025, the additional amount is $1,600 per qualifying condition for single filers and $1,300 per qualifying condition for married filers. These amounts are added on top of the basic standard deduction, reducing taxable income further.

Not every taxpayer qualifies to claim the standard deduction. A married person filing separately whose spouse itemizes must also itemize. Nonresident aliens are generally not allowed to claim the standard deduction. Estates and trusts also cannot use it. These exceptions push those taxpayers toward itemizing regardless of the relative dollar benefit.

The decision between claiming the standard deduction and itemizing is made each year on Schedule A of Form 1040. A taxpayer whose allowable itemized deductions — such as mortgage interest, charitable contributions, and state and local taxes subject to the SALT cap — exceed the standard deduction will typically benefit from itemizing. For most households, particularly those without a mortgage or significant deductible expenses, the standard deduction will be the larger and therefore more beneficial choice.

From an investment standpoint, the standard deduction interacts with decisions about charitable giving strategies such as donor-advised funds, where taxpayers may bundle multiple years of contributions into a single tax year to exceed the standard deduction threshold and itemize in that year, then revert to the standard deduction in subsequent years.