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Tax Deductions: Standard, Above-the-Line, Business
Standard
Deductions
are a fixed amount that reduces
the income on which you are taxed based on
filing status.
Standard deduction limits:
- $5,350 for
Single and Married Filing Separately
- $7,850 for Head
of Household
- $10,800 for
Married Filing Jointly and Qualifying
Widower
The statuses
above mean that fewer taxpayers benefit from
itemizing deductions.
Standard deductions are
higher for taxpayers
65 and older or, legally
blind.
Itemizing deductions
generally pays better only if
your qualifying expenses total more than the
standard deduction for your filing status.
In general, the basic standard deduction is
adjusted each year for inflation and varies
according to your filing status.
The basic standard deduction
of an individual who can be claimed as a
dependent on another person's tax return is
the greater of:
- The amount specified
by law, or the individual's earned
income plus a specified amount (the
total cannot be more than the basic
standard deduction for any filing
status).
- The additional
standard deduction amount for age,
blindness, or both is specified by
law and varies based on your filing
status.
- The additional amount
for age will be allowed if you are
age 65 or older at the end of the
tax year. You are considered to be
65 on the day before your 65th
birthday.
Your standard deduction
is increased by any state and local real
estate taxes you paid up to $500 ($1,000
if married filing joint). The taxes must
be the type that would be deductible on
Form 1040, Schedule A&B
Deductions can also be increased by any
net disaster loss from a federally
declared disaster.
Some individuals are not entitled to the
standard deductions including:
- Married individuals
filing a separate return whose
spouse itemizes deductions
- Individual who are
nonresident aliens or dual status
aliens during any part of the year
- Individuals who file
a return for a period of less than
12 months due to a change in their
annual accounting period, or
An estate or trust, common trust
fund, or partnership
You can claim above-the-line deductions
whether you itemize or not.
Schedule C filers may qualify for additional
deductions.
Deductions allow you to reduce your taxable
income and also your tax bill. A deduction
differs from a credit, which is applied
directly to your tax bill, reducing it
dollar for dollar. There are 4 major
categories of deductions.
Above-the-line Deductions
If you qualify, you can claim these
deductions even if you don't itemize.
Student Loan Interest Deduction up to
$2,500
Tuition and Fees Deduction up to $4,000 for higher education expenses.
Moving expenses the cost of moving to a new job location
Alimony, the amount of alimony you paid
Military reservists deduction a deduction
for non-reimbursable travel expenses for
reservists who service more than 100 miles
from home and stay overnight
Traditional IRA contributions up to $4,000, $5,000 if
your 50 or older.
Self-employment above-the-line deductions:
Half of your self-employment, Social
Security and Medicare tax
100% of self-employed health insurance
premiums for yourself and family
Contributions to self-employed retirement
plans.
Schedule C Business Deductions
If you own your own business, some
additional deductions apply to you. These
are claimed directly on your business
schedule, called a Schedule C. Farmers and
owners of rental property use Schedule E.
Deductions include
home office expenses
advertising and promotional costs
business liability insurance
legal and professional services
car and truck expenses
wages, employment taxes, employee benefit
plans and
retirement plans
depreciations
For other deductible items, see
schedules C and E. There are many rules and
limitations pertaining to some of these
deductions. |
