Issue: The standard deduction is an important but inconspicuous component of the Food Stamp Program’s benefit

formula.1 This deduction is a fixed dollar amount subtracted from household cash income before a family’s benefit

allotment is determined. The deduction is designed to

compensate for certain essential expenses that may reduce

the income available for food purchases. The standard

deduction greatly increases the average food stamp benefit

amount.

For almost two decades, lawmakers left the standard

deduction unchanged as a fixed dollar amount per household, except for inflation adjustments in some years (these

cost-of-living adjustments were eliminated in 1996). In

2001 and 2002, however, the standard deduction played an

important role in proposed legislative changes during the

reauthorization of the Food Stamp Program. This issue

brief explains the role of the standard deduction in the

food stamp benefit formula and analyzes options for

changing the level of the standard deduction.

Background: Modifying the food stamp benefit formula

is a major policy decision: $15.5 billion in food stamp

benefits were distributed according to this formula in

2001, providing food assistance to more than 17 million

low-income Americans. The U.S. Congress signals the

importance of the food stamp benefit formula by deciding

every parameter. By comparison, States are granted more

leeway to determine policies for the cash assistance program for low-income families with children, Temporary

Assistance for Needy Families (TANF).

To be eligible for food stamp benefits, a household must

have low income. The “net income test,” which households must pass to be eligible, requires that monthly cash

income after certain deductions be less than or equal to the

Federal poverty guidelines. Other eligibility “tests” place

limits on gross income (before deductions), household

assets (such as bank accounts and automobiles beyond a

certain value), and participation by certain types of people

(such as full-time college students and many noncitizen

immigrants). The full set of eligibility conditions is

explained on the Food and Nutrition Service (FNS) website (Food and Nutrition Service, 2001). 

An eligible household’s food stamp benefit allotment

depends on its monthly net income, which equals its

monthly gross cash income minus deductions. Monthly

gross cash income includes most resources coming into

the household, whether from government programs, labor

market earnings, or other sources. The benefit allotment

equals a maximum benefit amount, which varies by household size, minus 30 percent of monthly net income. For

one-person and two-person families, there is also a minimum benefit of $10 per month per family.

Six types of deductions from gross cash income are used

in computing monthly net income. Two of these deductions have by far the biggest impact on the average benefit

families receive: (1) the excess shelter expense deduction

(monthly shelter costs that exceed 50 percent of the

monthly income remaining after all other deductions are

subtracted from gross income, up to a fixed cap); and (2)

the standard deduction ($134 per household, in the contiguous United States). For most households, an additional

dollar of standard deduction raises the benefit level by 30

to 45 cents.2

United States

Department of

Agriculture

Economic 

Research

Service

The Standard Deduction in the Food

Stamp Benefit Formula

Parke Wilde

Food Assistance and Nutrition Research Report Number 26-3 June 2002

IN FOOD ASSISTANCE

1The “benefit formula” is the set of rules that determine each eligible person’s

or family’s benefit level.

2 The interactions among the deductions are complex. If a $1 increase in the

standard deduction reduced net income by $1, then the change would raise food

stamp benefits by 30 cents. However, for households that receive the shelter

deduction (but less than the shelter deduction cap), the amount of the shelter

deduction will increase when the standard deduction increases. In that case, a $1

increase in the standard deduction would raise food stamp benefits by 45 cents.

If the household receives either the minimum or the maximum benefit, the $1

increase in the standard deduction would have no effect on the food stamp benefits received.
The only change to the standard deduction since 1982 has

been inflation adjustments that Congress allowed in some

years but not others. While these annual cost-of-living

adjustments have frequently been small, their absence can

cause a substantial decline in the real value of the deduction over several years. In 2001 and 2002, Congress considered more substantial increases in the standard deduction for larger families. 

Findings:

A recent ERS report, Understanding the Food Stamp

Benefit Formula, explains one way to calculate how much

the standard deduction and other elements of the benefit

formula contribute to the average benefit amount (Wilde,

2001). Using updated data for fiscal year 2000, results are

shown in the first row of table 1. This breakdown indicates

that the standard deduction has a large effect on the average food stamp benefit amount.

The mean per person monthly benefit for all food stamp

participants may be broken down as the sum of the following six elements:

(1) If all eligible households had no cash income, mean

per person benefits would have equaled the mean per

person maximum benefit—$118.21.3 

(2) If all cash income had counted for purposes of benefit determination, the mean per person monthly benefit

would have fallen by $99.13.

(3) The standard deduction offset some of the cash

income and raised benefits by $25.32.

(4) The effect of other deductions—all deductions other

than the standard deduction—was $27.67.

(5) Some households that receive the maximum food

stamp benefit cannot make effective use of all of their

deductions, because their net income reaches zero. Any

further deductions, for which they might otherwise have

been eligible, have no effect on their benefit level. This

“maximum benefit effect” equaled -$7.07. 

(6) The mean per person minimum benefit effect was

$3.01.4 This effect shows the extent to which the minimum benefit rule raised the mean per person benefit

level. Clearly, from this breakdown, the standard deduction effect of $25.32 accounts for a large part of the

average benefit of $68.01.

This decomposition of the average benefit amount is just

one way to quantify the impact of the standard deduction.

In measuring the “standard deduction effect,” this

approach holds constant other deductions that would actually change if the standard deduction changed. For example, the shelter deduction is based in part on an assessment

of income after the standard deduction, but the earlier

computation ignores changes to the shelter deduction that

would accompany a change in the standard deduction. A

computer-intensive research method known as microsimulation can be used to carefully assess all of these interactions between deductions, but it would not change the

principal conclusion here: The standard deduction is

responsible for a large contribution to the average food

stamp benefit level.

Thus, alterations to the standard deduction can have a

major effect on program benefits and costs. For example,

some recent proposals would effectively index the standard deduction for inflation, by linking the standard

deduction to the Federal Government’s poverty guideline,

which is indexed for cost of living. Other proposals would

continue to fix the standard deduction in nominal dollar

terms, as has been the case since 1996, which would allow

the real value of the standard deduction and hence the

average food stamp benefit to decline over time.

The remaining rows of table 1 contain similar calculations

for households with one to five members (only 4 percent

of all food stamp households have more than five members). Because the standard deduction under current rules

is a fixed amount per household, its effect on per person

benefits falls sharply with household size. This deduction

raises per person benefits by $40.41 in one-person households and by $8.09 in five-person households.

2 Economic Research Service / USDA

The Standard Deduction in the Food Stamp Benefit Formula / FANRR-26-3

3For example, for two-person households in the contiguous 48 States, the per

person maximum benefit was $117 ($234 per household). For three-person

households, the per person maximum benefit was $111.67 ($335 per household). The mean value over all households, weighted using the household sampling weights provided with the Quality Control data, was $118.21.

4While the minimum benefit applied to only 11 percent of all households in the

sample (17 percent of all one- and two-person households), it nevertheless had

a substantial effect on those households to which it did apply. For one- and

two-person households with net incomes that approach the eligibility cutoff, the

maximum benefit minus 0.3 times net income equals a negative value. The minimum benefit effect measures the difference between this negative value and the

minimum benefit of $10.

2

Under current rules, the standard deduction raises 

per person food stamp benefits much more for 

small households than for large households.

1 The standard deduction has a major effect on 

the average food stamp benefit amount.
By comparison, the impact of some other elements of the

benefit formula is comparatively similar across household

sizes. For example, it is well known that the maximum

benefit in the food stamp benefit formula is scaled in favor

of smaller households, to account for “economies of

scale” in purchasing and preparing food in larger households. The first column of table 1 shows that this scale

adjustment for household size does not cause as much difference in the per person benefits received as the standard

deduction effect does.

Larger households also tend to be poorer in terms of cash

income per person. The main reason larger households do

not have a much lower per person benefit overall, in spite

of the standard deduction effect, is because of the income

effect. This effect lowers benefits more for small households than it does for large households, offsetting much of

the variation across household size that can be attributed

to the standard deduction effect. An increase in the standard deduction for larger households, while holding constant the deduction for smaller households, has the effect

of raising benefits for those households that tend to have

lower per capita income.

In addition to setting the level of the standard deduction,

and deciding whether it should be indexed for inflation,

policymakers must decide how the standard deduction

affects households of different sizes. There is a range of

options for scaling the standard deduction by household

size. At one end, the current rules stipulate a fixed-dollar

deduction per household. At the other end, a fixed-dollar

deduction per person would favor larger households more

than the current approach does. An intermediate proposal

is to express the standard deduction as a fixed percentage

of the poverty guidelines, which is itself scaled to account

for the different costs faced by households of different sizes.

An increase in the standard deduction generally raises the

benefit level for households with positive net cash income.

For most households with positive net cash income, a $1

increase in the standard deduction would raise food stamp

benefits by 30 to 45 cents. By comparison, for participating households with less than $134 in monthly gross cash

income, the current standard deduction is sufficient to

reduce their net income to zero, so they receive the maximum benefit amount. If the standard deduction increased,

these households would still have a net income of zero, so

they would still receive the same maximum benefit

amount. Thus, an increase in the standard deduction provides no additional food stamps to households that have

no net income.

Recent legislative proposals would increase the standard

deduction for households with four or more members—

households that usually have positive net income. In fiscal

year 2000, about 77 percent of households with three

members or fewer had positive net income, while 89 percent of larger households had positive net income. For

these 89 percent of larger households, an increase in the

standard deduction would generally raise the food stamp

benefit. For the remaining 11 percent of larger households

that have no net income, an increase in the standard

deduction would offer no change in their food stamp beneThe Standard Deduction in the Food Stamp Benefit Formula / FANRR-26-3

Economic Research Service / USDA 3

3

An increase in the standard deduction raises benefits

for households with positive monthly net income, such

as households with earnings. The increase does not

raise benefits for households that have no net income.

Table 1—Food stamp benefits

The standard deduction greatly raises average benefits, especially for small households

Benefit formula component 

Standard Other Maximum Minimum Food

Maximum Income deduction deductions benefit benefit stamp

benefit effect effect effect effect effect benefit

Dollars (mean per person)

All households 118.21 -99.13 25.32 27.67 -7.07 3.01 68.01 

By household size:

1 person 127.75 -136.73 40.41 39.74 -12.25 6.34 65.26 

2 people 117.56 -85.79 20.19 23.63 -5.10 1.52 72.01

3 people 112.17 -67.37 13.46 19.08 -3.23 0 74.11

4 people 107.13 -62.68 10.10 15.61 -1.86 0 68.30

5 people 101.71 -59.49 8.09 20.86 -1.11 0 70.06

Source: Author’s calculations from 2000 Quality Control data.

Note: Entries are rounded to two significant digits after the decimal.
The Standard Deduction in the Food Stamp Benefit Formula / FANRR-26-3

fit. Most low-income working households, for example,

would see their benefit level rise from an increase in the

standard deduction, while the very poorest food stamp

households would not see any change in their benefit

level.

Conclusions: Recent legislation has proposed to raise

the standard deduction for larger food stamp households.

A higher standard deduction for larger households would

partially offset a feature of the current benefit formula, in

which small households receive a higher per person benefit from the standard deduction than large households do.

A policy change of this nature would raise benefits for

many larger households, particularly working households

with earnings. For a comparatively small group of households with no net income (about 11 percent of all households with four or more members), an increase in the standard deduction would not raise the average benefit level.

For households with positive net income, such as from

earnings in the labor market, an increase in the standard

deduction would raise the average benefit level. 

Information Sources:

Food and Nutrition Service Website. “Food Stamps.”

Accessed March 13, 2001. http://www.fns.usda.gov/fsp

Wilde, Parke E. “The Food Stamp Benefit Formula:

Implications for Empirical Research on Food Demand.”

Journal of Agricultural and Resource Economics 26(1):75-

90. July 2001.

Wilde, Parke E. Understanding the Food Stamp Benefit

Formula: A Tool for Measuring the Component Effects.

FANRR-14. U.S. Department of Agriculture, Economic

Research Service, April 2001.

4 Economic Research Service / USDA

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