Standard deduction increased.(p138)
The standard deduction for most taxpayers who do not itemize their deductions on Schedule A of Form 1040 is higher in 2008 than it was in 2007. The amount depends on your filing status. In addition to the annual increase due to inflation adjustments, your 2008 standard deduction is increased by:
- Any state or local real estate taxes you paid that would be deductible on Schedule A if you were itemizing deductions, up to $500 ($1,000 if married filing jointly), and
- Any net disaster loss from a federally declared disaster.
You can use the 2008 Standard Deduction Worksheet in this chapter to figure your standard deduction.
This chapter discusses the following topics.
- How to figure the amount of your standard deduction.
- The standard deduction for dependents.
- Who should itemize deductions.
Most taxpayers have a choice of either taking a standard deduction or itemizing their deductions. If you have a choice, you can use the method that gives you the lower tax. The standard deduction is a dollar amount that reduces the amount of income on which you are taxed. It 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,
- Are blind,
- Pay state or local real estate taxes, or
- Have a net disaster loss from a federally declared disaster.
You benefit from the standard deduction if your standard deduction is more than the total of your allowable itemized deductions.
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 alien 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
The standard deduction amount depends on your filing status, whether you are 65 or older or blind, whether an exemption can be claimed for you by another taxpayer, whether you pay state or local real estate taxes, and whether you have a net disaster loss from a federally declared disaster. Generally, the standard deduction amounts are adjusted each year for inflation. Use Worksheet 20-1 to figure your standard deduction amount.taxmap/pub17/p17-103.htm#en_us_publink1000112848
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. taxmap/pub17/p17-103.htm#en_us_publink1000112849
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 2008 if you were born before January 2, 1944. taxmap/pub17/p17-103.htm#en_us_publink1000112850
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. You qualify for this benefit if you are totally or partly blind. taxmap/pub17/p17-103.htm#en_us_publink1000112851
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. taxmap/pub17/p17-103.htm#en_us_publink1000112852
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.
Your standard deduction is increased by any state and local real estate taxes you paid in 2008, up to $500 ($1,000 if married filing jointly). The taxes must be state or local real estate taxes that would be deductible on Form 1040 (Schedule A) if you were itemizing your deductions. Taxes deductible in arriving at adjusted gross income, such as taxes on business real estate and taxes on foreign real estate, cannot be used to increase your standard deduction.
If you are increasing your standard deduction by the amount of real estate taxes you paid, be sure to check the box on line 39c of Form 1040 or line 23c of Form 1040A.taxmap/pub17/p17-103.htm#en_us_publink1000112855
Your standard deduction is increased by any net disaster loss from a federally declared disaster that occurred in 2008. This amount is on Form 4684, line 18a.
If you are increasing your standard deduction by the amount of your net disaster loss, be sure to check the box on line 39c of Form 1040.
See the instructions for Form 4684, Casualties and Thefts, and Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas, for more information.taxmap/pub17/p17-103.htm#en_us_publink1000112856
The following examples illustrate how to determine your standard deduction using Worksheet 20-1.taxmap/pub17/p17-103.htm#en_us_publink1000112857
Larry, 46, and Donna, 33, are filing a joint return for 2008. Neither is blind, and neither can be claimed as a dependent. They did not pay real estate taxes or have a net disaster loss. They decide not to itemize their deductions. Because they are married filing jointly, they enter $10,900 on line 1 of Worksheet 20-1. They check the "No" box on line 2, so they also enter $10,900 on lines 4 and 10. Their standard deduction is $10,900.taxmap/pub17/p17-103.htm#en_us_publink1000112858
The facts are the same as in Example 1, except that Larry is blind at the end of 2008, so he and Donna enter $1,050 on line 5 of Worksheet 20-1. They then enter $11,950 ($10,900 + $1,050) on line 10, so their standard deduction is $11,950.taxmap/pub17/p17-103.htm#en_us_publink1000112859
Bill and Lisa are filing a joint return for 2008. Both are over age 65. Neither is blind, and neither can be claimed as a dependent. They did not pay real estate taxes or have a net disaster loss. They do not itemize deductions, so they use Worksheet 20-1. Because they are married filing jointly, they enter $10,900 on line 1. They check the "No" box on line 2, so they also enter $10,900 on line 4. Because they are both over age 65, they enter $2,100 ($1,050 × 2) on line 5. They enter $13,000 ($10,900 + $2,100) on line 10, so their standard deduction is $13,000.taxmap/pub17/p17-103.htm#en_us_publink1000112860
The facts are the same as in Example 3 except that Bill and Lisa paid $3,000 in local real estate taxes on their home in 2008, so they enter $3,000 on line 7 of the worksheet. They then enter $1,000 on lines 8 and 9 and $14,000 ($10,900 + $2,100 + $1,000) on line 10. Their standard deduction is $14,000.taxmap/pub17/p17-103.htm#en_us_publink1000112861
The facts are the same as in Example 4 except that Bill and Lisa had a net disaster loss from a federally declared disaster of $8,000. That is the amount on line 18a of their Form 4684. They enter $8,000 on line 6 of their Standard Deduction Worksheet. On line 10 of the worksheet, they enter $22,000 ($10,900 + $2,100 + $8,000 + $1,000), which is their standard deduction.