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The Standard Deduction

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Tax deductions are wonderful, aren’t they? While they’re not as good as a nice tax credit, tax deductions can reduce your tax liability significantly depending on your income tax bracket.

In the United States, you have two options when it comes to claiming deductions. You can go the easy route of claiming the standard deduction, which is a set amount each year that requires no documentation, or you can itemize your deductions, which allows you to select which deductions you want to claim and requires you to back it up with documentation.

Standard Deduction (2006-2012)

When you claim the standard deduction, you can’t also claim itemized deductions. For example, if you claim the standard deduction, you won’t be able to claim any mortgage interest as a deduction. You won’t be able to claim charitable contributions. It’s an either or choice – standard or itemized.

Here are the base standard deduction amounts for tax years 2006 through 2011:

Year Single Married
Filing
Jointly
Married
Filing
Separately
Head
of
Household
2006 $5,150 $10,300 $5,150 $7,550
2007 $5,350 $10,700 $5,350 $7,850
2008 $5,450 $10,900 $5,450 $8,000
2009 $5,700 $11,400 $5,700 $8,350
2010 $5,700 $11,400 $5,700 $8,400
2011 $5,800 $11,600 $5,800 $8,500
2012 $5,950 $11,900 $5,950 $8,700

Deduction Adjustments

Age, Vision Adjustment: If you are 65 years or older, your spouse is 65 years or older, legally blind and/or your spouse is legally blind, you can have an adjustment of $1,400 for single and HOH filers, $1,100 for married filing jointly (per person) per condition.

If you are married, both are over 65, then you increase your standard deduction by $2,200 ($1,100 x 2). If you are married, both are over 65 and both are blind, then you increase your standard deduction by $4,400 ($1,100 x 2 x 2).

Real Estate Taxes: If you paid state or local real estate taxes that you could otherwise claim as an itemized deduction, you can get up to $500 (single filers) or $1,000 (married filed jointly) increase to your standard deduction.

Itemize or Standard?

For 2012, a single filer can claim a $5,980 standard deduction on their income tax return. If that filer’s itemized deductions exceed $5,980, it’s better to claim itemized deductions. If they do not exceed $5,980, then it’s better to claim the standard deduction (also because it requires less paperwork).

Above-The-Line Deductions

Above-the-line deductions, officially called “adjustments to income,” are tax deductions that apply even if you claim the standard deduction. Whereas the mortgage interest rate deduction is only available if you itemize your deductions, contributions to an IRA or 401(k) are “adjustments to income.” These adjustments to income reduce your adjusted gross income (AGI) and, consequently, your taxes. Student loan interest, moving expenses, alimony and many others are considered above-the-line deductions (the list is pretty long and governed by Internal Revenue Code Section 62(a)(1)).

That’s the standard deduction in a nutshell. I hope that explanation comes in handy as you prepare your taxes this year!

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20 Responses to “The Standard Deduction”

  1. zapeta says:

    Thanks for the info, Jim!

  2. daenyll says:

    Gotta love the student loan interest above the line deductions.

  3. june says:

    This might sound like a dumb question, but what qualifies you as head of household, can you get the deduction for it if you’re single? If you are single but supporting someone, do you just claim them as a dependent to get the head of household deduction?

    Also does anyone know what the rules are as far is student loan interest deduction? I heard before if you make a certain income you can’t deduct the interest on student loans.

    Thanks so much!

  4. Anonymous says:

    Does the tax cut extension bill being currently debated in the Congress include the “Real Estate Tax” deduction for the standard deduction filers? Thanks.

  5. eric says:

    Very handy Jim, thanks. It’s a nice refresher for me since I’ve been in tax planning mode lately.

  6. Stu says:

    To qualify for head of household status you cannot be married or if you are married you do not qualify if you lived with your spouse for more than 6 months of the year.

    You also need to have a qualifying dependent living with you for more than half the year.

    Easy to read article here:
    http://taxes.about.com/od/filingstatus/qt/headofhousehold.htm

  7. billsnider says:

    There is a trick to get more deductions. You can do this by alternating the timing of itemized deductions.

    Can explain if anyone is interested.

    Bill Snider

  8. I assume a lot of people on here use software to file their taxes on their own. Have you guys ever paid an accountant to prepare them? How did it compare to how you did on your own?

    I used to do them with Turbo Tax, but the past few years I have paid an accountant, and the higher return he can get for me more than makes up for the fee he charges. So, it seems like it’s working out better for me to go that route…

    • Jim says:

      I’ve used an accountant and I’ve used software. The accountant saves you a little bit of time but you still have to double check their work, even if they are 100% competent (it is YOUR return, not theirs).

    • billsnider says:

      At work one year each person felt they had the best software or accountant. To end the arguement we tried them all out. We tested Turbotax, Tax cut, TaxAct, on line software and someone who was an accountant tried it for us.

      Ta Da ! They all had the same answer. why would it be different?

      We then tried some really odd ball situations. They were far out problems. We found one or two that did not agree with the bunch. This may be due to the way the software asks the question or how we interpret it. We then bounced these off of free consultants on the net. Low and behold, more variations.

      Conclusion – for the vast majority of tax returns, it does not matter. Use what you will and save on fees. If you have an oddball situation, maybe you have to ask an accountant or do more research yourself.

      Bill Snider

    • govenar says:

      A lot of the time spent on doing my taxes seems to be taken just by gathering all the records, stock transactions, etc. So I wouldn’t think that an accountant would save much time for me. (An exception would be for people who need to file taxes in many different states or who have complicated business situations.)

  9. thanks for the tips! taxes never seem to get easier to figure out.

  10. Tam says:

    Might sound like a dumb question but still a little confused about standard deduction- if you don’t itemize, you can get the standard deduction- for example married filing jointly- my husband and i can get 11,600 automatically?

  11. James says:

    Standard deductions and Exemptions should both be accomplished on the same form?

  12. drew says:

    My soon to be x-wife will be filing head of household and I will be filing single for past tax year. She itemized on her return. Can I also itemize if that gets a better deduction than standard?

  13. Bill Howard says:

    According to IRS Publication4491, the additional standard deduction for those over age 65 is $1,150 for married filing jointly, married filing separately, or Qualifying Widow(er)

  14. Anonymous says:

    Hi,
    I am 23, and my mother is claiming me as a dependent. My question is can I claim someone as a dependent as well?

  15. why is there so much conflicting info on adding real estate taxes if you take the std deduction?…and I don’t get the amount – it looks like $50 got added to my mom’s return (she is single and over 65 and got a std. deduction of $7250


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