Editor’s Note: The 2017 tax reform legislation roughly doubled the standard deduction to $24,000 per married couple ($29,200 for 2024 (projected), $27,700 for 2023, $25,900 for 2022 and $25,100 for 2021) and $12,000 per individual in 2018 ($14,600 for 2024 (projected) $13,850 for 2023, $12,950 for 2022 and $12,550 for 2021). For heads of households, the standard deduction is increased to $18,000 ($21,900 for 2024,  $20,800 for 2023, $19,400 for 2022 and $18,800 for 2021) and for married taxpayers filing separate returns, the standard deduction is $12,000 ($14,600 for 2024, $13,850 for 2023, $12,950 for 2022 and $12,550 for 2021). These amounts are indexed for inflation for tax years beginning after December 31, 2018 and are set to revert to pre-reform levels for tax years beginning after December 31, 2025.¹

There are two ways that taxable income may be calculated. First, taxpayers may subtract from adjusted gross income (see Q 715) the sum of their personal exemptions (prior to 2018 and after 2025) and the standard deduction. Alternatively, taxpayers can deduct from adjusted gross income their allowable personal exemptions (see Q 728, Q 729) and the total of their itemized deductions (see Q 731).²

Pre-reform, the standard deduction for 2017 was $12,700 for married individuals filing jointly and surviving spouses, $9,350 for heads of households and $6,350 for single individuals and married taxpayers filing separately.³ The standard deduction is adjusted annually for inflation.⁴

Planning Point: Because of the increased standard deduction and the elimination of many itemized deductions, it is likely that more taxpayers will choose the standard deduction under the new tax law. Those taxpayers who wish to take advantage of the remaining itemized deductions (for example, the deduction for charitable contributions) may benefit from planning to “bunch” those deductions into a single tax year in order to ensure that itemized deductions exceed the expanded standard deduction.

Individuals who do not itemize and who are classified as elderly (age 65 or older) or blind are entitled to increase their standard deduction. For taxable years beginning in 2024, individuals who are married or are surviving spouses are each entitled to an additional deduction of $1,550 ($1,500 in 2023, $1,400 in 2022, $1,350 in 2021, $1,300 in 2018-2020) if they are elderly and an additional $1,500 deduction if they are blind. The extra standard deduction is $1,950 (in 2024 (projected), $1,850 in 2023, 2023, $1,750 in 2022, $1,700 in 2021 and $1,650 in 2019-2020) for unmarried elderly taxpayers and $1,950 in 2024 (projected) for unmarried blind taxpayers.⁵ The additional amounts for elderly and blind individuals are indexed for inflation, and were not changed under the 2017 tax reform legislation.⁶

The following taxpayers are ineligible for the standard deduction and thus must itemize their deductions or take a standard deduction of zero dollars: (1) married taxpayers filing separately, if either spouse itemizes,⁷ (2) non-resident aliens, (3) taxpayers filing a short year return because of a change in their annual accounting period, and (4) estates or trusts, common trust funds, or partnerships.⁸

For taxable years beginning in 2024 (projected), the standard deduction for an individual who may be claimed as a dependent by another taxpayer is the greater of $1,300 ($1,250 in 2023, $1,150 in 2022, $1,100 in 2019-2021) or the sum of $450 ($400 in 2022 and 2023, $350 in 2019-2021) and the dependent’s earned income (but the standard deduction so calculated cannot exceed the regular standard deduction amount above).⁹ These dollar amounts are adjusted for inflation.¹⁰

“Marriage penalty” relief. EGTRRA 2001 increased the basic standard deduction for a married couple filing a joint return, providing for a phase-in of the increase until the basic standard deduction for a married couple filing jointly equaled twice the basic standard deduction for an unmarried individual filing a single return by 2009. JGTRRA 2003 accelerated the phase-in, providing that the basic standard deduction for a married couple filing a joint return equaled twice the standard deduction for an unmarried individual filing a single return for 2003 and 2004, then reverting to the lower, gradually increasing standard deduction amounts provided for under EGTRRA for 2005 through 2009. However, under WFTRA 2004 the standard deduction for married individuals filing jointly (and surviving spouses) is twice the amount (200 percent) of the standard deduction for unmarried individuals filing single returns for tax years beginning after December 31, 2003.¹¹ The larger standard deduction for married individuals filing jointly was scheduled to “sunset” (expire) for taxable years beginning after December 31, 2012, at which time the standard deduction in effect prior to the enactment of EGTRRA 2001 was to become effective (i.e., the standard deduction for married individuals filing jointly would, once again, be 167 percent of the standard deduction for single individuals).¹² The American Taxpayer Relief Act of 2012 prevented this sunset, so that the standard deduction for married individuals filing jointly (and surviving spouses) continues to be equal to 200 percent of the standard deduction for individual filers for tax years beginning after 2012.¹³

1.    IRC § 63(c)(7), Rev. Proc. 2018-57, Rev. Proc. 2019-44, Rev. Proc. 2020-45, Rev. Proc. 2021-45, Rev. Proc. 2022-38.

2.     IRC § 63.

3.     Rev. Proc. 2016-55.

4.     IRC § 63(c)(4).

5.    IRC § 63(f); Rev. Proc. 2017-58, Rev. Proc. 2019-44, Rev. Proc. 2020-45, Rev. Proc. 2021-45, Rev. Proc. 2022-38.

6.     IRC § 63(c)(4).

7.     IRS CCA 200030023.

8.     IRC § 63(c)(6).

9.    IRC § 63(c)(5); Rev. Proc. 2017-58, Rev. Proc. 2018-57, Rev. Proc. 2019-44, Rev. Proc. 2020-45, Rev. Proc. 2021-45, Rev. Proc. 2022-38.

10.   IRC § 63(c)(4).

11.   IRC § 63(c).

12.   JGTRRA 2003 § 107.

13.   Rev. Proc. 2013-35, above.

Under the 2017 tax reform legislation,¹ the following income tax rates and income thresholds apply for 2024:

The following income tax rates and income thresholds for 2023 are:

These rates are set to expire after 2025, and are adjusted for inflation for tax years beginning after 2018.

Pre-2018 Income Tax Rates

In 2001, EGTRRA added a new 10 percent income tax rate and reduced income tax rates above 15 percent for individuals, trusts and estates. EGTRRA 2001 also provided for subsequent rate reductions to occur in 2004 and 2006.² JGTRRA 2003 accelerated the reductions that were scheduled to occur in 2004 and 2006. Thus, for 2003 to 2012, the income tax rates above 15 percent were lowered to 25 percent, 28 percent, 33 percent and 35 percent (down from 27 percent, 30 percent, 35 percent, and 38.6 percent).³ The American Taxpayer Relief Act of 2012 (“ATRA”) made these tax rates “permanent,” preventing their increase to pre-2001 levels for tax years beginning after 2012.⁴

As discussed above, the income tax brackets effective in 2012 were to continue in effect permanently under ATRA, although certain high-income taxpayers were subject to a new 39.6 percent tax rate. These high-income taxpayers included individual taxpayers with taxable income that is above the “applicable threshold” amount. In 2017, the applicable threshold was $418,400 per year for single taxpayers, $470,700 for married taxpayers filing jointly, $444,550 for taxpayers filing as heads of household, and $235,350 for married taxpayers filing separately.⁵ These dollar limits were subject to annual inflation adjustment. For all other taxpayers, the tax system put into place under the EGTRRA 2001 and JGTRRA 2003 applied for tax years beginning after 2012 and before 2018 (creating a seven-bracket system: 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent, and 39.6 percent). The seven bracket system continues after enactment of the 2017 Tax Act, but the brackets were changed as shown in the chart above.

The income brackets to which each rate applies depend upon whether a separate return, joint return, head-of-household return, or single return is filed. (For an explanation of which taxpayers may file jointly or as a head-of-household, see Q 756 and Q 757.) The income brackets are indexed annually for inflation.⁶

Further, separate tax rates apply to capital gains (see Q 702). For the taxation of children on their unearned income, see Q 679.

1.     Pub. Law No. 115-97, known as the “Tax Cuts and Jobs Act” or the 2017 Tax Act, Rev. Proc. 2018-57, Rev. Proc. 2019-44, Rev. Proc. 2020-45, Rev. Proc. 2021-45, Rev. Proc. 2022-38.

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2.     IRC §§ 1(i)(1), 1(i)(2), prior to amendment by JGTRRA 2003.

3.     IRC § 1(i)(2), as amended by JGTRRA 2003.

4.     American Taxpayer Relief Act of 2012, Pub. Law No. 112-240.

5.     ATRA, § 101; Rev. Proc. 2016-55.

6.     IRC § 1(f).

The 2017 tax reform legislation changed the income tax rates that will apply to trusts and estates. These rates were especially important for 2018 and 2019 because taxpayers could elect to apply these rates to the unearned income of minors (see Q 679 and Q 8602). The SECURE Act eliminated this option for tax years beginning after 2019.

The applicable tax rates and income thresholds for 2024 are outlined in the chart below:¹

The applicable tax rates and income thresholds for 2023 are outlined below:

These applicable tax rates and income thresholds are set to expire for tax years beginning after December 31, 2025.

1.    IRC § 1(j)(2)(E), Rev. Proc. 2021-45, Rev. Proc. 2022-38, Rev. Proc. 2023-34.

The individual rate brackets, basic standard deduction, and personal exemption amounts are adjusted annually for inflation.¹ Indexing also applies to the additional standard deduction for the blind and elderly, the adoption credit, the exclusion for employer-provided adoption assistance, the exemption amount for the alternative minimum tax, and the threshold income levels for: phaseout of personal exemptions (which were suspended for 2018-2025); phaseout of the savings bond interest exclusion; phaseout of the deduction for interest on a qualified education loan; phaseout of the adoption credit; phaseout of the exclusion for employer-provided adoption assistance; and the ceiling on itemized deductions (note that all miscellaneous itemized deductions subject to the 2 percent floor were suspended for 2018-2025).² The American Opportunity and Lifetime Learning Credits are also indexed for inflation, as are the threshold income levels for their phaseout.³

Indexing provides the benefit of preventing tax rate increases that result purely from inflation, as taxpayers’ escalating income levels push them into higher tax brackets. It also ensures that the income levels at which certain tax benefits are eliminated remain at inflation-adjusted levels so that the provisions continue to benefit those taxpayers for whom they were intended.

Prior to 2018, the indexing factor (referred to in the IRC as the cost-of-living adjustment) was the percentage by which the Consumer Price Index (CPI) for the prior calendar year exceeded the CPI for a year designated as a reference point in each respective IRC Section. In all cases, the CPI is the average Consumer Price Index as of the close of the 12-month period ending on August 31 of the calendar year.⁴

The 2017 Tax Act provides that items that are adjusted annually for inflation will now be adjusted based on the Chained Consumer Price Index for All Urban Consumers (C-CPI-U), as published by the Department of Labor, for tax years beginning after December 31, 2017 (this change is therefore permanent).⁵ Essentially, the C-CPI-U is designed to take into account the fact that individuals change their purchasing habits as the cost of certain goods increases or decreases (in order to substitute lower priced goods for higher priced goods). C-CPI-U is designed to take into account purchasing patterns both before and after a price change.

Planning Point: This modification to the inflation indexing method was expected to push more taxpayers into higher tax brackets more quickly than under prior law. This is both because of the fact that C-CPI-U indexing makes it appear that inflation is growing faster than under CPI indexing, and because many employment-related increases in income are based on the CPI.

Regardless of the index that is used, in calculating the new tax rate schedules, the minimum and maximum dollar amounts for each rate bracket (except as described below) are increased by the applicable cost-of-living adjustment. The rates (percentages) themselves are not adjusted. This method of increase explained above, however, does not apply to the phaseout of the marriage penalty (see Q 753).⁶

The Secretary of the Treasury has until December 15 of each calendar year to publish new tax rate schedules (for joint returns, separate returns, single returns, head of household returns and for returns by estates and trusts) that will be effective for taxable years beginning in the subsequent calendar year.⁷ See Q 753.

1.     IRC §§ 1(f), 63(c)(4), 151(d)(4).

2.     IRC §§ 63(c)(4), 23(h), 137(f), 151(d)(4)(B), 135(b)(2)(B), 221(g), and 68(b)(2).

3.     IRC § 25A(h).

4.     IRC §§ 1(f)(3), 1(f)(4).

5.     IRC §§ 1(f)(3), 1(f)(6).

6.     IRC § 1(f)(2).

7.     IRC § 1(f)(1).

Two spouses may file a joint return. Same-sex couples who are married under state law must now file either jointly or married filing separately for 2013 and beyond because of the Supreme Court’s Windsor decision.¹ Gross income and deductions of both spouses are included; however, a joint return may be filed even though one spouse has no income. A widow or widower who has a dependent child may file as a “surviving spouse” and calculate tax using joint return tax rates for two years after the taxable year in which the spouse died. However, no personal exemption is allowed for the deceased spouse except in the year of death (note that the personal exemption was suspended from 2018-2025).²

1.     Windsor v. U.S. 133 S. Ct. 2675 (2013).

2.     IRC §§ 1(a), 2(a), 6013(a). See IRC § 151(b).

The 2017 tax reform legislation imposes a due diligence requirement for tax preparers in determining whether head-of-household filing status is appropriate. A $500 penalty will now apply for each failure of a tax preparer to satisfy due diligence requirements with respect to determining head-of-household status.¹  A tax preparer can rely in good faith, without verification, on information furnished by the client, but cannot ignore information furnished to or known by the preparer.

An individual who meets the four requirements below may use the applicable head-of-household rates:

(1)     The individual must be (a) unmarried, or (b) legally separated from his spouse under a decree of divorce or of separate maintenance, or (c) married, living apart from his spouse during the last six months of the taxable year, and maintaining as his home a household that constitutes the principal place of abode for a “qualifying child”.² See Q 729 with respect to whom the individual is entitled to claim a deduction, and with respect to whom the taxpayer furnishes over one-half the cost of maintaining such household during the taxable year.³

(2)     The individual must maintain as his home a household in which one or more of the following persons lives: (a) a qualifying child (if that individual is unmarried, it is not necessary that he have less than the personal exemption amount ($4,200 in 2019, $4,300 in 2020-2021, $4,400 in 2022, and $4,700 in 2023)⁴ of income or that the head-of-household furnish more than one-half his support; if the qualifying child is married, he must qualify as a dependent of the taxpayer claiming head-of-household status (or, would qualify except for the waiver of the exemption by the custodial parent (see Q 729)), or (b) any other person for whom the taxpayer can claim a dependency exemption (pre-2018) except a cousin or unrelated person living in the household.⁵ An exception to this rule is made with respect to a taxpayer’s dependent mother or father: so long as he maintains the household in which the dependent parent lives, it need not be his home.⁶

Planning Point: For purposes of the definition of “dependent” for determining head of household status, the IRS has released guidance stating that the exemption amount (which was otherwise reduced to zero for 2018-2025) will be treated as though it remained at the pre-reform amount of $4,200 in 2019, $4,300 in 2020-2021, $4,400 in 2022, and $4,700 in 2023.⁷

(3)     The individual must contribute over one-half the cost of maintaining the home.⁸

(4)     Taxpayer must not be a nonresident alien.⁹

1.     IRC § 6695(g).

2.     As defined in IRC § 152(c).

3.     IRC §§ 2(b)(1), 2(c), 7703(b).

4.    Rev. Proc. 2018-57, Rev. Proc. 2019-44, Rev. Proc. 2020-45, Rev. Proc. 2021-34, Rev. Proc. 2022-38.

5.     IRC § 2(b)(1); Treas. Reg. § 1.2-2(b).

6.     IRC § 2(b)(1).

7.     Rev. Proc. 2018-57, Rev. Proc. 2019-44, Rev. Proc. 2020-45, Rev. Proc. 2021-34, Rev. Proc. 2022-38, Rev. Proc. 2023-34.

8.     IRC § 2(b)(1).

9.     IRC §§ 2(b), 2(d).