The standard deduction is a set amount, adjusted yearly for inflation, that can be subtracted from your gross income, thus reducing the total income upon which you are taxed and, by extension, your overall income tax liability.
The standard deduction is an alternative to itemizing deductions, such as medical expenses, charitable contributions, etc. If you itemize deductions, you cannot claim the standard deduction. You should therefore choose whichever option is the greatest and results in less tax owed.
The amount you can claim as a standard deduction varies according to your filing status. For 2011 the standard deduction is:
- $5,950 for single filers
- $11,900 for married couples filing jointly
- $5,950 for married couples filing separately
- $8,700 for heads of household
- $11,900 for qualifying widow(er)
The standard deduction for the blind and those over the age of 65 may be higher than the basic standard deduction.
You can also claim a standard deduction on your return for your dependents. It is equivalent to at least $950 or to the dependent’s earned income for the year plus $300, whichever is higher. It cannot however be greater then the basic standard deduction amount.
Note that the standard deduction is distinct from personal exemptions, which are also available to all taxpayers and their dependents.