What Are the Standard Deduction and Personal Exemption?

The U.S. tax system provides ways for taxpayers to reduce their taxable income, historically including the standard deduction and the personal exemption. These two mechanisms have been fundamental in calculating tax liability. While both serve to lower the amount of income subject to tax, their application and status have undergone significant changes in recent years.

The Elimination of the Personal Exemption

The personal exemption was a specific dollar amount that taxpayers could deduct from their income for themselves, their spouse, and each qualifying dependent they claimed. For the 2017 tax year, this amount was $4,050 per person. This meant a married couple with two children could have subtracted $16,200 from their income, lowering their tax burden. The value of this deduction was tied to a taxpayer’s marginal tax rate, providing a greater dollar-value benefit to those in higher tax brackets.

A major shift occurred with the passage of the Tax Cuts and Jobs Act of 2017 (TCJA), which eliminated the personal exemption for tax years 2018 through 2025 by reducing its value to zero. This was part of a broader restructuring of the tax code aimed at simplification. To offset the removal of the personal exemption, the TCJA nearly doubled the standard deduction and expanded the value and availability of other benefits, such as the Child Tax Credit.

Understanding the Standard Deduction

The standard deduction is a fixed dollar amount that taxpayers can subtract from their adjusted gross income (AGI) to reduce their taxable income. This option is available to those who choose not to itemize deductions, which involves listing out specific deductible expenses. The standard deduction simplifies tax preparation, as it does not require tracking and documenting individual expenses. The Internal Revenue Service (IRS) adjusts these amounts annually for inflation.

For the 2025 tax year (taxes filed in 2026), the standard deduction amounts are set as follows. For those with a Single or Married Filing Separately status, the deduction is $15,000. For the Head of Household status, the amount is $22,500. For Married Filing Jointly and Qualifying Widow(er) statuses, the deduction is $30,000.

The tax code provides for an increased standard deduction for taxpayers who are age 65 or older, or who are legally blind. For 2025, this additional amount is $2,000 for single and head of household filers. For those who are married, the additional amount is $1,600 for each spouse who qualifies. A taxpayer who is both over 65 and blind can claim the additional amount twice. For example, a single individual over 65 would have a total 2025 standard deduction of $17,000.

Who Can Claim the Standard Deduction

The majority of individual taxpayers are eligible to claim the standard deduction, with nearly 90% of filers choosing it over itemizing. However, there are specific circumstances under which a taxpayer is prohibited from taking the standard deduction.

A taxpayer generally cannot claim the standard deduction if they are a married individual filing a separate return and their spouse chooses to itemize deductions. This rule prevents a couple from having one spouse itemize to deduct large specific expenses while the other takes the full standard deduction. Other ineligible individuals include nonresident aliens and dual-status aliens during the tax year, with limited exceptions. An individual filing a return for a period of less than 12 months because of a change in their accounting period is also barred.

A special rule applies to individuals who can be claimed as a dependent on another person’s tax return. For 2025, a dependent’s standard deduction is limited to the greater of either $1,350 or their total earned income plus $450. This amount cannot exceed the regular standard deduction for their filing status. For example, a student claimed as a dependent who earned $5,000 from a job would calculate their standard deduction as $5,450 ($5,000 + $450).

Standard Deduction vs. Itemized Deductions

When filing a tax return, individuals must choose between taking the standard deduction or itemizing their deductions. Itemized deductions are specific, eligible expenses that are reported on Schedule A of Form 1040 to lower taxable income. If the total of a taxpayer’s itemized deductions is greater than the standard deduction amount for their filing status, it is generally more advantageous to itemize.

Common categories of itemized deductions include:

• Payments for state and local taxes (SALT), which are capped at $10,000 per household per year.
• Home mortgage interest on up to $750,000 of mortgage debt.
• Charitable contributions.
• Medical expenses that exceed 7.5% of a taxpayer’s adjusted gross income (AGI).

For example, if a married couple filing jointly in 2025 has a standard deduction of $30,000, they should calculate their potential itemized deductions. If they paid $10,000 in state and local taxes, $12,000 in mortgage interest, and made $3,000 in charitable gifts, their total itemized deductions would be $25,000. In this scenario, taking the $30,000 standard deduction would result in a larger reduction of their taxable income.