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Standard Deduction or Itemized Deductions

Claiming the Standard Deduction

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Improved Version Available: An updated version of this article is available. Please view Standard Deduction.

The Standard Deduction

(Form 1040 Line 40)

Everyone is entitled to reduce their taxable income by tax deductions. You can generally choose between your standard deduction or your itemized deductions, whichever figure is more advantageous. Together, your deductions and your personal exemptions (line 42) reduce your adjusted gross income to arrive at your taxable income. So these two items reduce taxable income before the regular income tax is computed.

Like the various adjustments to income (lines 23 to 35), itemized deductions provide a way for you to convert your otherwise taxable income into nontaxable income provided that you spend your money on various tax-privileged items.

The standard deduction depends largely on your filing status. The standard deduction amounts for 2007 are as follows:

  • Single: $5,350
  • Married Filing Jointly: $10,700
  • Married Filing Separately: $5,350*
  • Head of Household: $7,850
  • Qualifying Widow(er) with Dependent Child: $10,700
* If you are married filing separately, you and your spouse must BOTH take the standard deduction or you must BOTH itemize your deductions.

Additionally, if someone else can claim you as a dependent, or if you were born before January 2, 1943, or if you are legally blind, you must use the worksheet in the Instructions for Form 1040 (PDF), page 32 to calculate your standard deduction.

Basically, the standard deduction for a dependent is the larger of the following two numbers:

  • $850, or
  • the dependent's earned income plus $300, but not to exceed the standard deduction for the dependent's filing status.

People born before January 2, 1943, and people who are legally blind receive an additional standard deduction. The standard deduction is calculated by adding the person's standard deduction, plus the additional amount. Additional amounts are:

  • $1,300 for single or head of household
  • $1,050 for married filing jointly, married filing separately, or qualifying widow.
For example, if a husband and wife are both born before January 2, 1943, and are both blind, they would have a standard deduction of $14,900.

More information from About.com:
Itemized Deductions

Form 1040 Essentials

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