In U.S. personal finance, the standard deduction is the fixed amount a taxpayer may subtract from income before calculating federal income tax.
Taxpayers generally choose between the standard deduction and itemizing eligible deductions. The standard deduction requires less recordkeeping, while itemizing can be advantageous when qualifying deductions exceed the standard amount. The amount depends on filing status and is adjusted periodically under federal tax law.
The standard deduction reduces taxable income; it is not a tax credit. A deduction lowers the amount of income subject to tax, whereas a credit directly reduces tax owed. This distinction is a common source of confusion when comparing tax benefits.
The U.S. Tax Cuts and Jobs Act of 2017 substantially increased standard deductions beginning in 2018 and suspended personal exemptions through 2025. Annual amounts can change, so current tax-year figures should be checked with the Internal Revenue Service.