Increase in standard deduction. The standard deduction for most taxpayers who do not itemize deductions on Schedule A of Form 1040 is higher in 2005 than
it was in 2004. The
amount depends on your filing status. There are tables at the end of this chapter to help you figure your standard deduction
for 2005.
Introduction
This chapter discusses:
How to figure the amount of your standard deduction,
The standard deduction for dependents, and
Who should itemize deductions.
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.
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, on Schedule A of Form 1040. The standard deduction is higher for taxpayers who are 65 or older or
blind. If you have a
choice, you should use the method that gives you the lower tax.
You benefit from the standard deduction if your standard deduction is more than the total of your allowable itemized deductions.
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.
Note. If you are a nonresident alien who is married to a U.S. citizen or resident at the end of the year, you can choose to be treated
as a U.S. resident. (See Publication 519, U.S. Tax Guide for Aliens.) If you make this choice, you can take the standard deduction.
If an exemption for you can be claimed on another person's return (such as your parents' return),
your standard deduction may be limited. See Standard Deduction for Dependents, later.
Standard Deduction Amount
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. The standard deduction
amounts for most taxpayers
for 2005 are shown in Table 20-1.
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 2005 if you were
born before January 2,
1941.
Use Table 20-2 to figure the standard deduction amount.
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.
You cannot claim the higher standard deduction for an individual other than yourself and your spouse.
Examples
The following examples illustrate how to determine your standard deduction using Tables 20-1 and 20-2.
Example 1.
Larry, 46, and Donna, 33, are filing a joint return for 2005. Neither is blind. They decide not to itemize their deductions.
They use Table 20-1.
Their standard deduction is $10,000.
Example 2.
Assume the same facts as in Example 1, except that Larry is blind at the end of 2005. Larry and Donna use Table 20-2. Their
standard deduction is
$11,000.
Example 3.
Bill, 72, and Terry, 66, are filing a joint return for 2005. Neither is blind. They decide not to itemize their deductions.
They use Table 20-2.
Their standard deduction is $12,000.
Standard Deduction for Dependents
The standard deduction for an individual for whom an exemption can be claimed on another person's tax return is generally
limited to the greater
of:
$800, or
The individual's earned income for the year plus $250 (but not more than the regular standard deduction amount, generally
$5,000).
However, if the individual is 65 or older or blind, the standard deduction may be higher.
If an exemption for you (or your spouse if you are filing jointly) can be claimed on someone else's return, use Table 20-3
to determine your
standard deduction.
Earned income defined.
Earned income is salaries, wages, tips, professional fees, and other amounts received as pay for work you actually
perform.
For purposes of the standard deduction, earned income also includes any part of a scholarship or
fellowship grant that you must include in your gross income. See Scholarship and Fellowship Grants in chapter 1 of Publication 970 for more
information on what qualifies as a scholarship or fellowship grant.
Example 1.
Michael is single. His parents claim an exemption for him on their 2005 tax return. He has interest income of $780 and wages
of $150. He has no
itemized deductions. Michael uses Table 20-3 to find his standard deduction. He enters $150 (his earned income) on line 1,
$400 ($150 plus $250) on
line 3, $800 (the larger of $400 and $800) on line 5, and $5,000 on line 6. The amount of his standard deduction, on line
7a, is $800 (the smaller of
$800 and $5,000).
Example 2.
Joe, a 22-year-old full-time college student, is claimed on his parents' 2005 tax return. Joe is married and files a separate
return. His wife does
not itemize deductions on her separate return.
Joe has $1,500 in interest income and wages of $3,800. He has no itemized deductions. Joe finds his standard deduction by
using Table 20-3. He
enters his earned income, $3,800, on line 1. He adds lines 1 and 2 and enters $4,050 on line 3. On line 5 he enters $4,050,
the larger of lines 3 and
4. Since Joe is married filing a separate return, he enters $5,000 on line 6. On line 7a he enters $4,050 as his standard
deduction because it is
smaller than $5,000, the amount on line 6.
Example 3.
Amy, who is single, is claimed on her parents' 2005 tax return. She is 18 years old and blind. She has interest income of
$1,300 and wages of
$2,900. She has no itemized deductions. Amy uses Table 20-3 to find her standard deduction. She enters her wages of $2,900
on line 1. She adds lines 1
and 2 and enters $3,150 on line 3. On line 5 she enters $3,150, the larger of lines 3 and 4. Since she is single, Amy enters
$5,000 on line 6. She
enters $3,150 on line 7a. This is the smaller of the amounts on lines 5 and 6. Because she checked one box in the top part
of the worksheet, she
enters $1,250 on line 7b. She then adds the amounts on lines 7a and 7b and enters her standard deduction of $4,400 on line
7c.
Who Should Itemize
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, as discussed earlier under Persons not eligible 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.
You may be subject to a limit on some of your itemized deductions if your adjusted gross income (AGI) is more than $145,950
($72,975 if you are
married filing separately). See chapter 29 and the instructions for Schedule A (Form 1040), line 28, for more information
on figuring the correct
amount of your itemized deductions.
When to itemize.
You may benefit from itemizing your deductions on Schedule A (Form 1040) 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.
These deductions are explained in chapters 21-28.
If you decide to itemize your deductions, complete Schedule A and attach it to your Form 1040.
Enter the amount from Schedule A, line 28, on Form 1040, line 40.
Electing to itemize for state tax or other purposes.
Even if your itemized deductions are less than the amount of your standard deduction, you can elect to itemize deductions
on your federal return
rather than take the standard deduction. You may want to do this, for example, if the tax benefit of being able to itemize
your deductions on your
state tax return is greater than the tax benefit you lose on your federal return by not taking the standard deduction. To
make this election, you must
check the box on line 29 of Schedule A.
Changing your mind.
If you do not itemize your deductions and later find that you should have itemized — or if you itemize your deductions
and later find you
should not have — you can change your return by filing Form 1040X, Amended U.S. Individual Income Tax Return. See Amended Returns and
Claims for Refund in chapter 1 for more information on amended returns.
Married persons who filed separate returns.
You can change methods of taking deductions only if you and your spouse both make the same changes. Both of you must
file a consent to assessment
for any additional tax either one may owe as a result of the change.
You and your spouse can use the method that gives you the lower total tax, even though one of you may pay more
tax than you would have paid by using the other method. You both must use the same method of claiming deductions. If one itemizes
deductions, the
other should itemize because he or she will not qualify for the standard deduction. See Persons not eligible for the standard deduction,
earlier.
2005 Standard Deduction Tables
If you are married filling a separate return and your spouse itemizes deductions, or if you are a dual-status alien, you cannot
take the standard
deduction even if you were born before January 2, 1941, or you are blind.
Table 20-1. Standard Deduction Chart for Most People*
IF your filing status is...
THEN your standard deduction is...
Single or Married filing separately
$5,000
Married filing jointly or Qualifying widow(er) with dependent child
10,000
Head of household
7,300
* Do not use this chart if you were born before January 2, 1941, or you are blind, or if someone else can claim an exemption
for you (or your spouse if married filing jointly). Use Table 20-2 or 20-3 instead.
Table 20-2. Standard Deduction Chart for People Born Before January 2, 1941, or Who are Blind*
Check the correct number of boxes below. Then go to the chart.
You
Born before January 2, 1941
Blind
Your spouse, if claiming spouse's exemption
Born before January 2, 1941
Blind
Total number of boxes you checked
IF your
filing status is...
AND the number in the box above is...
THEN your standard deduction is...
Single
1
$6,250
2
7,500
Married filing jointly or
1
11,000
Qualifying widow(er)
2
12,000
with dependent child
3
13,000
4
14,000
Married filing
1
6,000
separately
2
7,000
3
8,000
4
9,000
Head of household
1
8,550
2
9,800
* If someone can claim an exemption for you (or your spouse if married filing jointly), use Table 20-3,
instead.
Table 20-3. Standard Deduction Worksheet for Dependents
Use this worksheet only if someone else can claim an exemption for you (or your spouse if married filing jointly).
If you were born before January 2, 1941, or you are blind, check the correct number of boxes below. Then go to the
worksheet.
You
Born before January 2, 1941
Blind
Your spouse, if claiming spouse's exemption
Born before January 2, 1941
Blind
Total number of boxes you checked
1.
Enter your earned income (defined below). If none, enter -0-.
1.
2.
Additional amount
2.
$250
3.
Add lines 1 and 2.
3.
4.
Minimum standard deduction.
4.
$800
5.
Enter the larger of line 3 or line 4.
5.
6.
Enter the amount shown below for your filing status.
•
Single or Married filing separately— $5,000
6.
•
Married filing jointly or Qualifying
widow(er) with dependent child—$10,000
•
Head of household—$7,300
7.
Standard deduction.
a.
Enter the smaller of line 5 or line 6. If born after January 1, 1941, and not blind, stop here. This is your standard deduction.
Otherwise, go on to line 7b.
7a.
b.
If born before January 2, 1941, or blind, multiply $1,250 ($1,000 if married or qualifying widow(er) with dependent child)
by the number in the
box above.
7b.
c.
Add lines 7a and 7b. This is your standard deduction for 2005.
7c.
Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you
performed. It also includes any amount received as a scholarship that you must include in your income.
