Increase the Standard Deduction by 25 Percent for All Filing Groups

In 2026, the standard deduction is $16,100 for single taxpayers, $32,200 for married filing jointly, and $24,150 for head of household taxpayers. The standard deduction is adjusted for inflation annually.

This option raises all three standard deduction values by 25 percent and continues to inflation-adjust them going forward. A higher standard deduction would push some taxpayers into lower marginal tax brackets, leading to a reduction in the marginal tax rate on income. At the same time, inducing some taxpayers to switch from itemizing their deductions to taking the standard deduction would increase marginal tax rates on certain types of activity, including charitable giving and housing.

On a conventional basis, this option would increase the primary deficit by $1,351.4 billion over the budget window. Long-run GDP would decline slightly, while long-run GNP would fall by 0.1 percent as the larger budget deficit would increase federal government borrowing, and more interest payments would flow to foreigners. Incorporating changes in interest costs, the publicly held debt-to-GDP ratio would be higher than baseline, reaching 187.2 percent by 2056.

On average, in 2036, taxpayers would see increases in their after-tax incomes of 0.7 percent. The middle quintiles would benefit the most, with after-tax income increasing between 1.0 percent and 1.1 percent in 2036. The top quintile of taxpayers would experience a 0.5 percent increase, whereas the bottom quintile would experience a 0.1 percent increase, as most already have little to no tax liability. On a long-run dynamic basis, taxpayers would see a 0.7 percent increase on average.