Your
standard deduction is the amount you deduct from your adjusted gross income (
AGI) in order to calculate your
taxable income.
The larger your deduction, the lower your taxable income and the smaller your
tax liability will be.
When you file a federal income tax return (usually
IRS Form 1040 or a simplified version of the form), you take either a standard deduction or you can
itemize your deductions. You take the larger of the two deductions to lower your taxable income.
The IRS increases the standard deduction each year to adjust for increases in the general rate of
inflation. It calculates the standard deduction by looking at the average amounts for
itemized deductions that taxpayers have claimed in previous years.
However, just because you may elect to itemize your deductions doesn't always mean you should. The standard deduction is likely to be close to what your itemized deductions would be, on average, and is a heck of a lot easier to calculate.
The following table shows standard deductions for 2007 for each
tax filing status. If you qualify as either blind or over age, or both, your standard deduction is larger.
Standard deductions (2007):
