Zero Bracket Amount

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Zero Bracket Amount

A lump-sum allowance of income that a taxpayer could receive without imposition of any federal Income Tax because it was considered equivalent to the standard amount of deductions usually taken by an average taxpayer. It was replaced by the standard deduction in the tax reform act of 1986. 100 Stat. 2085, 26 U.S.C.A. §§ 47, 1042.

The zero-bracket amount was so named because a zero rate of taxation was applied to it. Its financial value was determined by the filing status of the taxpayer. If a taxpayer had more deductions that qualified as itemized deductions than the zero-bracket amount, she could itemize deductions, but the itemized deductions were reduced by the zero bracket amount. That figure was subtracted from the taxpayer's adjusted gross income to find her taxable income, upon which the income tax liability was computed.

Congress eliminated the zero-bracket amount in the Tax Reform Act of 1986, replacing it with the standard deduction. The standard deduction is a specific dollar amount that can be deducted from income by those taxpayers who do not itemize their deductions because their deductions do not exceed the standard deduction assigned to them. The base amount of the standard deduction depends on the taxpayer's filing status (single, married filing jointly, married filing separately, head of household, or qualifying widow or widower).