What is the Standard Deduction?
The standard deduction is the amount of income you get to deduct from your total taxable income. Because the standard deduction lowers your taxable income, it means you pay less income tax.
In 2019, the standard deduction for someone filing as single is $12,200. For a Head of Household, the standard deduction is $18,350. And for married couples, the standard deduction is $24,400.
For example, let’s say you are single, and in 2019 your total taxable, earned income was $48,000. That is the amount your employer will report to the IRS.
When you file your taxes, you report the same amount, but then you get to deduct $12,200 from the $48,000. Now the amount you pay taxes on is $35,800. You would go to the IRS tax table for the year 2019 (this table is currently still a draft on the IRS website) and it will tell you that in 2019, the total tax due on $35,800 (your new taxable income amount) is $4,129.00. If you didn’t have the standard deduction, the total tax due on $48,000 would have been $6,424.
Because of the standard deduction, your tax liability decreased by $2,295. That’s money that you don’t have to pay to the IRS!
Linda Jacob is a Certified Financial Planner® and an Accredited Financial Counselor®. Linda began working in the banking industry in high school and put herself through college. After years of growing assets for her clients, her true purpose in life became clear. She was put on earth to help everyone become successful money managers, get out of debt, and reach their financial goals. When Linda isn’t working, she enjoys cooking, golfing, and reading.