In brief
- The standard deduction is the amount taxpayers can subtract from their income if they don’t break out, or “itemize,” deductions for mortgage interest, charitable contributions, state and local taxes and other items separately.
- For 2020, the standard deduction is $12,400 for single filers and $24,800 for married couples filing jointly. It was nearly doubled by Congress in 2017.
- The personal exemption is the subtraction from income for each person included on a tax return—typically the members of a family. It was repealed in 2017.
Standard deduction nearly doubled in 2017
The standard deduction is the amount taxpayers can subtract from income if they don’t break out deductions for mortgage interest, charitable contributions, state and local taxes and other items separately on Schedule A. Listing these deductions separately is called “itemizing.”
For 2020, the standard deduction is $12,400 for single filers and $24,800 for married couples filing jointly. For 2021, it is $12,550 for singles and $25,100 for married couples.
In 2017 Congress made a landmark change by nearly doubling the standard deduction, and the percentage of tax filers using it rose to 87% in 2019 from 68% two years before, according to IRS data and an estimate by the Tax Policy Center. This shift has simplified returns for about 35 million filers and lightened the IRS’s burden by reducing the number of deductions it needs to monitor.
However, people who take the standard deduction don’t get a specific tax benefit for having mortgage interest or making midsize charitable donations. (For 2020 and 2021, Congress is allowing charitable deductions of small amounts by filers who don’t itemize.) That’s expected to affect many filers’ future decisions about donations or owning a home.
Personal exemption repealed until 2026
The 2017 repeal of the personal exemption was a landmark shift as well. This benefit was a subtraction from income for each person included on a tax return—typically the members of a family. The 2017 amount was $4,050 per person, and it phased out for higher earners.
The personal exemption was also integral to figuring out an employee’s correct withholding from pay.
The interaction of the expanded standard deduction, repealed personal exemption and expanded child credit is complex, and the effects on individuals have varied widely. In part this is because the personal exemption was a deduction from taxable income, while the child credit is a dollar-for-dollar offset of taxes—and some taxpayers can get a portion of it even if they don’t owe income taxes.
The repeal of the personal exemption—and the expanded standard deduction and child credit—expire at the end of 2025.
This year’s tax deadline for individuals is May 17. Interested in knowing more before you file your taxes? Register for free to download your complimentary copy of the WSJ Tax Guide 2021.
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