Zero-Bracket Amount Law and Legal Definition

Zero-bracket amount is a tax deduction formerly available to all individual taxpayers, regardless of whether they itemized their deductions. It is a lump-sum allowance of income that a taxpayer could receive without imposition of any federal income tax since it was considered equivalent to the standard amount of deductions usually taken by an average taxpayer. However, it was replaced by the standard deduction in the Tax Reform Act of 1986.

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, s/he 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 his/her taxable income, upon which the income tax liability was computed.