When it comes to lowering taxable income to pay less tax, Americans have two options; take the standard deduction or itemize deductions. While the standard deduction is a fixed amount that is determined by the filing status, itemizing deductions are granted for the deduction qualifying expenses. However, if the standard deduction is claimed on a tax return, the taxpayer cannot itemize and vice versa.
This is why everyone should calculate their deduction both ways and claim the one that reduces taxable income the most on a tax return. At the time of writing, the IRS hasn’t announced the standard deduction amount. With that said, we can only speculate how much the standard deduction can be in 2021.
After the Tax Cuts and Jobs Act of 2017, the standard deduction has been nearly doubled. Since then, the standard deduction is on a steady increase of $200 for single filers and $300 and $350 for the heads of household. Because the standard deduction is increased by $200 every year, joint filers got an extra $400. This made the standard deduction a lot more appealing to taxpayers over itemizing.
IRS Standard Deduction Increase for the 2021 Tax Season
Before we make any guesses, let’s take a look at how the standard deduction have been increased over the years.
|Single – Married Filing Separately||$12,000||$12,200||$12,400|
|Married Filing Jointly – Qualifying Widow(er)||$24,000||$24,400||$24,800|
|Head of Household||$18,000||$18,350||$18,650|
There is also the case with those who are legally blind. If a taxpayer is legally blind, the standard deduction is increased by $1,650 additionally for single and head of household. If married filing jointly or your spouse is legally blind, you may get $1,300 in addition to the set standard deduction amount.
Given the standard deduction has been increased by $200 to $350 every year, it is expected that we will have a similar increase in 2021. If the increase were to be like this, here is what the 2021 standard deduction will look like.
|Single – Married Filing Separately||$12,600|
|Married Filing Jointly – Qualifying Widow(er)||$25,200|
|Head of Household||$18,950 or $19,000|
The above table represents our prediction for the 2021 standard deduction. As soon as the IRS announces the 2021 standard deduction amounts along with the 2021 tax brackets, we will keep you updated. In the meantime, catch up on the 2021 tax changes from our homepage.