Standard Deduction

Everyone is entitled to reduce their taxable income by tax deductions. Generally speaking, you can choose between your standard deduction or your itemized deductions. Just be sure to choose whichever figure is more advantageous. Together with your personal exemption amount, the standard deduction reduces your adjusted gross income to arrive at your taxable income. It's on the taxable income amount that your tax will be calculated.

How much of a standard deduction you qualify for depends on your filing status, age, and whether you are blind.

Standard Deduction Amounts for 2012

• Single: $5,950
• Head of Household: $8,700
• Married Filing Joint: $11,900
• Married Filing Separately: $5,950
• Qualifying Widow/Widower: $11,900
• Dependent: $950-$5,950

Standard Deduction Amounts for 2011

• Single: $5,800
• Head of Household: $8,500
• Married Filing Joint: $11,600
• Married Filing Separately: $5,800
• Qualifying Widow/Widower: $11,600
• Dependent: $950-$5,800

Standard Deduction Amounts for 2010

• Single: $5,700
• Head of Household: $8,400
• Married Filing Joint: $11,400
• Married Filing Separately: $5,700
• Qualifying Widow/Widower: $11,400
• Dependent: $950-$5,700

Special Rule for Married Couples Filing Separate Returns

If you are married filing separately, you and your spouse must both take the standard deduction or you must both itemize your deductions. You cannot mix-and-match (where one spouses itemizes and the other takes the standard deduction). As such, it usually makes sense to figure your taxes both ways (each spouse itemizing vs. each spouse taking the standard deduction) to see which will yield the best overall tax savings.

Standard Deduction Amounts for Dependents

Dependents have a variable standard deduction amount. The amount is determined by the larger of the following two figures:

• $950, or
• the dependent's earned income plus $300, but not to exceed the standard deduction for the dependent's filing status.

The dependent is usually single, so this makes the maximum standard deduction for a dependent $5,800 for 2011 or $5,950 for 2010.

Additional Standard Deduction Based on Age or Blindness

People age 65 or older, and people who are legally blind receive an additional standard deduction. The standard deduction is calculated by adding the person's standard deduction (based on their filing status), plus the additional amount.

Additional standard deduction amounts for 2012 are:

• $1,450 for single or head of household
• $1,150 for married filing jointly, married filing separately, or qualifying widow.

Additional amounts for 2011 are:

• $1,450 for single or head of household
• $1,150 for married filing jointly, married filing separately, or qualifying widow.

The additional amounts for 2010 are:

• $1,400 for single or head of household
• $1,100 for married filing jointly, married filing separately, or qualifying widow.

Additional Standard Deduction for Property Taxes

For the years 2008 and 2009 only, homeowners were able to claim on additional $500 to $1,000 on top of their standard deduction. This additional amount is designed for homeowners who don't itemize but who paid real estate taxes for their residence. This additional standard deduction is no longer available for 2010, 2011 or 2012.

This additional standard deduction for property tax is worth $500, or an additional $1,000 for married couples who file jointly.

Additional Standard Deduction for Car Sales Tax

For 2009 only, individuals could deduct sales tax paid on the purchase of a new vehicle. The deduction is available for cars, trucks, motorcycles, motor homes and recreational vehicles. The vehicles must be purchased after February 16, 2009, and before January 1, 2010 to qualify for the deduction. The vehicle sales tax deduction is limited to the tax paid on the first $49,500 of the vehicle's purchase price.

New Schedule L

People who are taking advantage of one or more additional amounts added to their standard deduction will need to use Schedule L (2 pages including instructions). This new tax form can be utilized with either Form 1040 (the long form) or 1040A (the short form).