The standard deduction can help you deduct thousands of dollars from your taxable income. What is it, and how do you claim it?
It is never too late to start thinking about how you plan to do your taxes, and one of the most important things to consider during tax season is what you plan to do about tax deductions.
Tax deductions can help you limit the amount of taxable income you can claim on your form, allowing you to reduce some useful tax breaks in the process. The year you have will help you determine what deductions you can or should claim. The standard deduction is one of those that will always be an option.
Statistically, most taxpayers in a given year require the standard deduction. But what is the standard tax deduction, what amount and deduction are right for you this year?
What is the standard deduction?
The standard deduction provided by the IRS is, as the name suggests, the standard tax deduction offered to taxpayers on their Form 1040. There are situations where making other deductions does not allow you to claim them, but the standard deduction is one of the principal options that the IRS offers for deductions.
A standard tax deduction is a fixed number deducted from taxable income. The specific number mainly depends on your marital status for filing purposes, but other factors affect it.
The standard deduction increases each year slightly but has increased, especially last year. This is due to the Tax Cuts and Jobs Acts (TCJA) passage, which increased the standard deduction (but eliminated the personal exemption). In 2017, the standard deduction for a single contributor was $ 6,500. In 2018, it was $ 12,000. For 2019, it will return to its year-to-year increase.
The standard deduction can make a substantial difference to taxpayers by reducing thousands of dollars in their taxable income. Depending on your gross income before the standard deduction, this could change the tax level and decrease the amount to be taxed and the rate at which you are taxed.
About 70% of taxpayers opted for the standard deduction before the changes. However, due to the increase in the deduction, it has been estimated that after the approval of the TCJA, this number could increase to 90%.
How the standard deduction works.
Even if you have no other deductions or tax credits, the IRS allows you to make the standard deduction without asking questions. The standard deduction decreases the amount of income you have to pay in tax.
It is possible to make the standard deduction or itemize on your tax return; you cannot do both. Itemized deductions are essential expenses allowed by the IRS, which can reduce your taxable income.
Accepting the standard deduction means that you cannot deduct mortgage interest on your home, nor do many other common tax deductions: medical bills or charitable donations, for example. (But if you specify, you must keep records to support your deductions if the IRS decides to conduct an audit.)
2019-2020 Standard Deduction Rate: how much does it cost?
So you know what the standard deduction is, and you might be thinking about claiming it now that you've seen how much it's gone up. But what will it look like for the next tax season?
As mentioned above, in general, the amount you can deduct using the standard tax deduction will depend on how you report your taxes.
Filing Status.
Your filing status determines the default deduction. For 2020, the standard deduction based on the state of the deposit is as follows:
Filing Status and standard deductions for 2019
Single - $12,400
Married filing separately - $12,400
Married filing jointly - $24,400
HOH - $18,650
Most of these represent percentage increases of 1.67% over the previous year. The only exception is for those who claim HOH, which increased by 1.94%.
You can also only claim the standard deduction while you are married, and you can only file a separate claim if your spouse requests it.
Age and blindness.
There are a few other factors that can lead to a standard deduction in addition to those listed above.
One of those factors is age. Taxpayers aged 65 and over will benefit from different standard deductions, as well as legally blind taxpayers. These two types of taxpayers have the same differences in standard deductions. For married taxpayers in these categories, the standard deduction increases by $ 1,300. For individual contributors or HOH who fall into these categories, it increases by $ 1,650.
Dependents.
If you are claimed as a dependent, you will still be entitled to the standard deduction. However, the amount decreases. For the 2019 financial season, in this case, you cannot claim more than $ 1,100 or the amount of your earned income over $ 350.
When are you not eligible for a standard deduction?
The standard deduction is mainly available, but it is not possible to claim it in some cases.
As mentioned above, if you are married and intend to apply separately, you must claim the standard deduction for both. If one of the spouses decides not to do so, the other cannot claim it.
If you have changed your annual accounting period and therefore completed the record for less than 12 months, the IRS also considers that you are not eligible for the standard deduction.
Often, non-residents at some point during the year cannot claim the standard deduction, but there are exceptions. Suppose you are a non-resident alien that married a resident alien or a U.S. citizen. In that case, you can claim the standard deduction, but only if you request a joint return and choose to treat the nonresident alien as a U.S. citizen.
However, the most common way to not qualify for the standard deduction is to choose to itemize the deductions.
How to claim the standard deduction.
One of the complaints about itemized deductions is the difficulty in identifying and adding them, especially given the recent changes in 1040, which involve joining different programs depending on what you need to add or subtract from income.
However, the standard deduction is much less complicated. You already know what that is worth to you, more or less, depending on how you present it. To claim it, you don't need a different form, only a Form 1040. You can enter the standard deduction or the combined sum of itemized deductions on line 8.
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