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The IRS-specified amount by which a taxpayer is entitled to reduce income an alternative to itemizing deductions.
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In American tax law, the portion of an individual's or couple's income that is not taxed. The standard deduction is taken after computing the adjusted gross income. Taxpayers have the option of choosing between the standard deduction and making itemized deductions, based on medical expenses or local taxes paid. Itemized deductions may or may not result in a larger percentage of income that is tax free, and taxpayers usually take the larger deduction. The amount in the standard deduction varies from year to year, depending on inflation and a person's filing status. However, it is higher for persons over age 65 and blind persons.
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The minimum deduction from income allowed a taxpayer for calculating taxable income. Individuals with few itemized deductions elect the standard deduction in place of itemizing deductions. Formerly called zero bracket amount.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.