Standard Deduction

In the new tax law, personal exemptions are eliminated. Every taxpayer will be affected by this change.

Under the previous tax law, each personal exemption reduced taxable income by $4,050 (in 2017). So, the taxpayer, spouse, and each dependent reduced taxable income by a multiple of the personal exemption amount. Losing that deduction sounds pretty bad so far!

But hold on, there are other changes that help mitigate the loss of this deduction. One potential factor is the increase in the standard deduction, as shown in the table below.

2018 Standard Deduction
Each taxpayer and/or spouse
Filing Status Standard Deduction Age 65 or older Blind
Single 12,000 1,600 1,600
Married 24,000 1,300 1,300
Head of Household 18,000 1,600 1,600
Married Filing Separately 12,000 1,300 1,300

Compare these increases with the amounts under prior law:

2017 Standard Deduction
Each taxpayer and/or spouse
Filing Status Standard Deduction Age 65 or older Blind
Single 6,350 1,550 1,550
Married 12,700 1,250 1,250
Head of Household 9,350 1,550 1,550
Married Filing Separately 6,350 1,250 1,250

So, the 2018 Standard Deduction for a married couple, both age 65 or older, and one blind, is $24,000 + ($1,300 X 3)= $3,900 = $27,900. In contrast, the 2017 Standard deduction for the same couple was $12,700 + ($1,250 X 3)= $3,750 = $16,450. To compare apples to apples, we need to consider the personal exemptions that were allowed most taxpayers in 2017. So, to the 2017 standard deduction, we add ($4,050 X 2) for our couple, for a total of $16,450 + 8,100 = $24,550 in 2017, vs. $27,900 in 2018. Our couple above will pay tax on $27,900 – 24,750 = $3,350 less income in 2018.

So, across the board, the increase in Standard Deduction results in lower taxable income for all taxpayers who 1) don’t itemize deductions and 2) have no other dependents.

Well, that sounds good, except for those who itemize deductions or have other dependents. Click here to find out more about the repeal of personal exemptions.

Back to Individual 2018 tax changes