Increase in
standard deduction. The
standard deduction for most
taxpayers who do not itemize
deductions on Schedule A of Form
1040 is higher in 2004 than it
was in 2003. The amount depends
on your filing status. There are
tables at the end of this
chapter to help you figure your
standard deduction for 2004.
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 2004
are shown in Table 22-1.
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
2004 if you were born
before January 2, 1940.
Use Table 22-2 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 22-2. 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 22-1 and 22-2.
Example 1.
Larry, 46, and
Donna, 33, are
filing a joint
return for 2004.
Neither is blind.
They decide not to
itemize their
deductions. They use
Table 22-1. Their
standard deduction
is $9,700.
Example 2.
Assume the same
facts as in Example
1, except that Larry
is blind at the end
of 2004. Larry and
Donna use Table
22-2. Their standard
deduction is
$10,650.
Example 3.
Bill, 72, and
Terry, 66, are
filing a joint
return for 2004.
Neither is blind.
They decide not to
itemize their
deductions. They use
Table 22-2. Their
standard deduction
is $11,600.
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
$4,850).
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
22-3 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 2004 tax return.
He has interest income
of $780 and wages of
$150. He has no itemized
deductions. Michael uses
Table 22-3 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 $4,850 on line 6.
The amount of his
standard deduction, on
line 7a, is $800 (the
smaller of $800 and
$4,850).
Example 2.
Joe, a 22-year-old
full-time college
student, is claimed on
his parents' 2004 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
22-3. 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 $4,850 on line 6.
On line 7a he enters
$4,050 as his standard
deduction because it is
smaller than $4,850, the
amount on line 6.
Example 3.
Amy, who is single,
is claimed on her
parents' 2004 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 22-3 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
$4,850 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
$1,200 on line 7b. She
then adds the amounts on
lines 7a and 7b and
enters her standard
deduction of $4,350 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
$142,700 ($71,350 if you are
married filing separately). See
chapter 31 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 23–30.
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 39.
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 enter “IE”
(itemized elected) on the
dotted line next to line 39
(Form 1040).
If Your Filing
Status is...
Your Standard
Deduction is...
Single or
Married filing
separate return
$4,850
Married filing
joint return or
Qualifying
widow(er) with
dependent child
9,700
Head of
household
7,150
*Do not use
this chart if
you were 65 or
older or blind,
or if someone
else can claim
an exemption for
you (or your
spouse if
married filing
jointly). Use
Table 22-2 or
22-3 instead.
Check the
correct number
of boxes below.
Then go to the
chart.
You
65 or older
Blind
Your spouse, if
claiming
spouse's
exemption
65 or older
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
$6,050
2
7,250
Married filing
joint
1
10,650
return or
Qualifying
2
11,600
widow(er) with
3
12,550
dependent child
4
13,500
Married filing
1
5,800
separate return
2
6,750
3
7,700
4
8,650
Head of
household
1
8,350
2
9,550
*If someone
else can claim
an exemption for
you (or your
spouse if
married filing
jointly), use
Table 22-3,
instead.
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
65 or older or blind.
If you were 65
or older or
blind, check the
correct number
of boxes below.
Then go to the
worksheet.
You
65 or older
Blind
Your spouse, if
claiming
spouse's
exemption
65 or older
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 amount.
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—
$4,850
6.
•
Married filing
jointly or
Qualifying
widow(er) with
dependent
child—$9,700
•
Head of
household—$7,150
7.
Standard
deduction.
a.
Enter the
smaller of line
5 or line 6. If
under 65 and not
blind, stop
here. This is
your standard
deduction.
Otherwise, go on
to line 7b.
7a.
b.
If 65 or older
or blind,
multiply $1,200
($950 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
2004.
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.
*Use this
worksheet only
if someone else
can claim an
exemption for
you (or your
spouse if
married filing
jointly).
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.)
