Understanding the Standard DeductionPublished:
How the Standard Deduction Can Reduce Your Federal Tax Bill
It’s the age-old question: Should you take the standard deduction, or should you itemize your deductions?
To properly answer this question, you must first understand what the standard deduction is.
The Standard Deduction
The standard deduction is designed to assist all taxpayers by reducing their taxable income. A taxpayer can choose to claim either the standard deduction or itemized deductions, but not both.
The dollar amount of the standard deduction is adjusted each year for inflation, and it varies based on your filing status. For example, a “head of household” filer gets a larger standard deduction than a “single” filer.
The basic standard deduction amounts for 2014 are as follows:
• Single: $6,200
• Married Filing Separately: $6,200
• Married Filing Jointly: $12,400
• Head of Household: $9,100
The IRS website provides an online tool so you can calculate your standard deduction.
For anyone who can be claimed as a dependent on someone else’s tax return, the basic standard deduction amount cannot exceed the greater of:
• $1,000, or
• The sum of $350 and the individual’s earned income
The standard deduction is claimed on Page 2 of IRS Form 1040 or Form 1040A.
The Additional Standard Deduction (Age or Blindness)
Certain taxpayers are allowed to take an additional standard deduction for age or blindness.
You are eligible for an additional standard deduction for age if you are at least 65 years old on the last day of the tax year. (Note that you are considered to be 65 years old on the day before your 65th birthday.)
You are eligible for an additional standard deduction for blindness if you are blind on the last day of the tax year. (If you aren’t completely blind, you’ll need to obtain a certified statement from an eye doctor indicating that your vision meets certain requirements.)
A taxpayer who is both blind and over age 65 may claim the basic standard deduction as well as an additional standard deduction (equal to the total of the additional amounts for age and blindness).
To claim the additional standard deduction, you must check the appropriate box(es) on Page 2 of IRS Form 1040 or Form 1040A. Note that you cannot use Form 1040EZ if you want to claim an additional standard deduction.
Who Cannot Claim the Standard Deduction?
The following taxpayers are not allowed to claim the standard deduction:
• A married person using the status “married filing separately,” whose spouse itemizes his/her deductions.
• A person who was a nonresident alien or dual status alien during any part of the year. See IRS Publication 519 (U.S. Tax Guide for Aliens) for more information.
• A taxpayer whose tax return covers less than 12 months because of a change in his/her annual accounting period.
• An estate, trust, common trust fund, or partnership.
It’s generally recommended that you itemize deductions if you aren’t entitled to a standard deduction, or if your total itemized deductions are greater than the standard amount.
Itemized deductions can include medical expenses, home mortgage loan interest, real estate taxes, charitable donations, unreimbursed employee business expenses, uninsured casualty or theft losses, and more.
For more information, please refer to IRS Publication 17 (Your Federal Income Tax) and IRS Publication 501 (Exemptions, Standard Deduction, and Filing Information).