STANDARD DEDUCTION AND ITEMIZED DEDUCTION

 
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Posted On : 26th Nov 2010

STANDARD DEDUCTION AND ITEMIZED DEDUCTION

Most taxpayers have a choice of either taking a standard deduction or itemizing their deductions. The standard deduction is a dollar amount that reduces the amount of income on which you are taxed.

STANDARD DEDUCTION:

The standard deduction is a benefit that eliminates the need for many taxpayers to itemize actual deductions, such as medical expenses, charitable contributions, and taxes. The standard deduction is higher for taxpayers who are 65 or older or blind.

Persons not eligible for the standard deduction.   Your standard deduction is zero and you should itemize any deductions you have if:

  • You are married and filing a separate return, and your spouse itemizes deductions,

  • You are filing a tax return for a short tax year because of a change in your annual accounting period, or

  • You are a nonresident or dual-status alien during the year. You are considered a dual-status alien if you were both a nonresident and resident alien during the year.

The standard deduction amount depends on your filing status, whether you are 65 or older or blind, and whether an exemption can be claimed for you by another taxpayer. Generally, the standard deduction amounts are adjusted each year for inflation.

Decedent's final return.  The amount of the standard deduction for a decedent's final tax return is the same as it would have been had the decedent continued to live. However, if the decedent was not 65 or older at the time of death, the higher standard deduction for age cannot be claimed.

Higher Standard Deduction for Age (65 or Older). If you do not itemize deductions, you are entitled to a higher standard deduction if you are age 65 or older at the end of the year. You are considered 65 on the day before your 65th birthday. Therefore, you can take a higher standard deduction for 2007 if you were born before January 2, 1943.

Higher Standard Deduction for Blindness. If you are blind on the last day of the year and you do not itemize deductions, you are entitled to a higher standard deduction as shown in Table 20-2. You qualify for this benefit if you are totally or partly blind.

 
Partly blind.   If you are partly blind, you must get a certified statement from an eye doctor or registered optometrist that:

  • You cannot see better than 20/200 in the better eye with glasses or contact lenses, or

  • Your field of vision is not more than 20 degrees.

If your eye condition will never improve beyond these limits, the statement should include this fact. You must keep the statement in your records.

  

  If your vision can be corrected beyond these limits only by contact lenses that you can wear only briefly because of pain, infection, or ulcers, you can take the higher standard deduction for blindness if you otherwise qualify.           

Spouse 65 or Older or Blind. You can take the higher standard deduction if your spouse is age 65 or older or blind and:

  • You file a joint return, or

  • You file a separate return and can claim an exemption for your spouse because your spouse had no gross income and an exemption for your spouse could not be claimed by another taxpayer.

ITEMIZED DEDUCTION:

You should itemize deductions if your total deductions are more than the standard deduction amount. Also, you should itemize if you do not qualify for the standard deduction.

You should first figure your itemized deductions and compare that amount to your standard deduction to make sure you are using the method that gives you the greater benefit.

When to itemize.   You may benefit from itemizing your deductions if you:

  • Do not qualify for the standard deduction, or the amount you can claim is limited,

  • Had large uninsured medical and dental expenses during the year,

  • Paid interest and taxes on your home,

  • Had large unreimbursed employee business expenses or other miscellaneous deductions,

  • Had large uninsured casualty or theft losses,

  • Made large contributions to qualified charities, or

  • Have total itemized deductions that are more than the standard deduction to which you otherwise are entitled.

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