Final answer:
The standard deduction is a predetermined amount that individuals can use to reduce their adjusted gross income to simplify tax filing. In 2010, the amount for a single taxpayer was $9,350. This choice is contrasted with itemizing deductions, which can involve a more complex tax filing process.
Step-by-step explanation:
The standard deduction is a flat amount that most individuals can elect to deduct instead of deducting their itemized deductions. In the context of U.S. individual income taxation, this deduction simplifies the tax preparation process by allowing taxpayers to reduce their adjusted gross income by a set amount, subsequently determining their taxable income. For instance, in 2010, a single taxpayer could deduct $9,350 for the standard deduction and exemptions.
Two key facts about the U.S. tax system that are evident from the figures provided are: first, as an individual’s income increases, their tax liability also increases, shown by the upward-sloping line on the graph. Second, as income increases, an individual pays a larger proportion of this income in taxes, indicated by the line becoming steeper at higher income levels, which can be contrasted with proportional taxes where the tax rate remains constant regardless of income.
While the standard deduction is intended to simplify the tax filing process, taxpayers who may benefit more from itemizing their deductions, which might include home mortgage interest or property taxes, would file a more comprehensive tax return to potentially lower their tax liability further than the standard deduction would allow.