Standard Deduction
The standard deduction is a fixed amount the IRS lets US taxpayers subtract from gross income before calculating tax, without itemising individual deductions. For 2025: $15,000 (single) or $30,000 (married filing jointly).
US taxpayers choose between taking the standard deduction or itemising deductions (mortgage interest, state taxes, charitable donations, etc.). Taking whichever is higher reduces taxable income more.
Since the Tax Cuts and Jobs Act of 2017 roughly doubled the standard deduction, approximately 90% of US filers now take the standard deduction rather than itemising.
The UK equivalent is the Personal Allowance (£12,570 in 2025/26). Canada uses the Basic Personal Amount (approximately $16,129 federally in 2025). Australia has no direct equivalent — the tax-free threshold is $18,200.
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- Tax Bracket
- A tax bracket is a range of income taxed at a specific rate in a progressive tax system. Each bracket rate applies only to the income within that range, not to your entire income.
- Marginal Tax Rate
- Your marginal tax rate is the rate you pay on the last dollar of income earned — the rate of the highest tax bracket you fall into. It is not the rate applied to your entire income.
- Gross Income
- Gross income is your total income before any taxes, deductions, or withholdings. It is the starting figure used by lenders for DTI calculations and by tax authorities to determine your tax bracket.