Deductions

Standard Deduction 2021

Every year, about 9 out of 10 taxpayers claim the standard deduction on their federal income tax return. Since 2018, the standard deduction has been steadily increasing. As of now, it is too early to talk about the standard deduction in 2021. We can only assume the increase will be similar to the previous year, the standard deduction 2021 may look like this:

  • $12,400 for single filers
    • up $200 from 2020
  • $25,200 for joint filers
    • up $400 from 2020
  • $18,950 for head of household
    • up $300 from 2020

After the Tax Cuts and Jobs Act of 2017 (TCJA), the standard deduction steadily increased by $200 for singles and about $300 for the head of household. If the changes are going to be the same as last year, the standard deduction is going to be a lot more appealing to even more taxpayers. Considering many itemized deduction thresholds were increased to reduce the deduction amount overall, the standard deduction might be claimed by more taxpayers in 2021 than previous years.

For example, the medical expenses threshold was upped from medical expenses exceeding 7.5% of the AGI to 10%. This means someone who claimed this deduction in 2020 is going to lose 2.5% of their AGI in deductions. With that said, the standard deduction will definitely be more attractive to most taxpayers if the deduction amount increases.

You can take a look at the standard deductions amounts after the Tax Cuts and Jobs Act of 2017.

YearSingle / Married Filing SeparetelyMarried Filing Jointly / Qualifying Widow(er)Head of Household
2020$12,400$24,800$18,650
2019$12,200$24,400$18,350
2018$12,000$24,000$18,000
Standard Deduction After TCJA of 2017

Itemized Deductions in 2021

Given the standard deduction is expected to be increased in 2021, the itemized deductions are expected to be less of an option to most taxpayers. Especially considering the fact that the itemized deductions are becoming less accessible.

Lat year, about 90% of the households took the standard deduction. This number is only expected to rise in 2021.

One thing to note about the itemized deductions is 2020 was definitely a rough year for many—financially. There might be tax breaks for those who had been financially hurt by the COVID-19 pandemic. If these were to be in itemized deductions, the standard deduction may not be that beneficial. All and all though. we will have to wait for the IRS to announce the standard deduction before we can say anything.

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