Why are business expenses deductible from income, but someone’s basic living expenses aren’t deductible from personal income?
In: Economics
At some level, the answer here is going to be “it is this way because Congress decided to make it this way”. Creating a tax code is rather challenging and so you have to make trade-offs and balance a lot of different competing factors.
But yeah, the standard deduction is essentially supposed to represent basic living expenses. It’s much more efficient to just say “here’s the standard deduction and it’s the same for everyone” than it would be to allow everyone to itemize individual expenditures from the cost of daily living. You’d have to figure out what was or wasn’t a “basic” living expense. There would be challenges. What if someone has a lot more living expenses for any number of reasons? What if someone’s rent is higher because they live in a more expensive area? You’d end up needing to cap “basic living expenses” somehow…which would just be a broad standard deduction.
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