The standard deduction for some taxpayers who do not itemize their deductions on Schedule A of Form 1040 is higher in 2010 than it was in 2009. The amount depends on your filing status. In addition to the annual increase for some taxpayers due to inflation adjustments, your 2010 standard deduction is increased by:

• Any state or local sales or excise taxes you paid in 2010 on the purchase of a new motor vehicle after February 16, 2009, and before 2010, and
• Any net disaster loss you had in 2010 because of a disaster that occurred before 2010 and was declared a federal disaster after 2007.

You can use the 2010 Standard Deduction Worksheet in this chapter to figure your standard deduction. But to increase your standard deduction by taxes paid on the purchase of a new motor vehicle or a net disaster loss, you must use Schedule L (Form 1040A or 1040) and attach it to your return.

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,
• Have a net disaster loss in 2010 because of a disaster that occurred before 2010 and was declared a federal disaster after 2007, or
• Paid state or local sales or excise taxes (or certain other taxes or fees in a state without a sales tax) in 2010 on the purchase of a new motor vehicle after February 16, 2009, and before 2010.

Your standard deduction is zero and you should itemize any deductions you have if:

• Your filing status is married filing separately, and your spouse itemizes deductions on his or her return,
• 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.
  

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 have a net disaster loss from a federally declared disaster, and whether you paid state or local sales or excise tax (or certain other taxes or fees in a state without a sales tax) in 2010 on the purchase of a new motor vehicle after February 16, 2009, and before 2010. Generally, the standard deduction amounts are adjusted each year for inflation. Use Worksheet 20-1 to figure your standard deduction amount.

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.

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 2010 if you were born before January 2, 1946.

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.

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.

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.

Your standard deduction is increased by any state or local sales or excise taxes you paid in 2010 on the purchase of a new vehicle after February 16, 2009, and before 2010.

If you bought the vehicle in 2010, you cannot increase your standard deduction by any taxes you paid on the purchase.

The amount is limited to tax on the first $49,500 of the purchase price. The taxes must be state or local sales or excise taxes that would be deductible on Form 1040 (Schedule A) if you were itemizing your deductions. In states without a sales tax, certain other taxes or fees qualify if they are assessed on the purchase of the vehicle and are based on the vehicle's sales price or as a per unit fee. Taxes deductible in arriving at adjusted gross income, such as taxes on a vehicle used in your business, cannot be used to increase your standard deduction.

If you are increasing your standard deduction by the amount of these state or local sales or excise taxes, complete Schedule L (Form 1040A or 1040) and attach it to your return.

Your standard deduction is increased by any net disaster loss you had in 2010 because of a disaster that occurred before 2010 and was declared a federal disaster after 2007. This amount is on Form 4684, line 17.

If you are increasing your standard deduction by the amount of your net disaster loss, complete Schedule L (Form 1040A or 1040) and attach it to your return.

The following examples illustrate how to determine your standard deduction using Worksheet 20-1.

Larry, 46, and Donna, 33, are filing a joint return for 2010. Neither is blind, and neither can be claimed as a dependent. They did not pay sales or excise taxes on the purchase of a new motor vehicle or have a net disaster loss. They decide not to itemize their deductions. Because they are married filing jointly, they enter $11,400 on line 1 of Worksheet 20-1. They check the "No" box on line 2, so they also enter $11,400 on lines 4 and 7. Their standard deduction is $11,400.

The facts are the same as in Example 1 except that Larry is blind at the end of 2010, so he and Donna enter $1,100 on line 5 of Worksheet 20-1. They then enter $12,500 ($11,400 + $1,100) on line 7, so their standard deduction is $12,500.

Bill and Lisa are filing a joint return for 2010. Both are over age 65. Neither is blind, and neither can be claimed as a dependent. They did not pay sales or excise taxes on the purchase of a new motor vehicle 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 $11,400 on line 1. They check the "No" box on line 2, so they also enter $11,400 on line 4. Because they are both over age 65, they enter $2,200 ($1,100 × 2) on line 5. They enter $13,600 ($11,400 + $2,200) on line 7, so their standard deduction is $13,600.

The facts are the same as in Example 3 except that Bill and Lisa had a $8,000 net disaster loss from a federally declared disaster that occurred in 2009. That is the amount on line 17 of their Form 4684. They enter $8,000 on line 6 of Worksheet 20-1. On line 7 of the worksheet, they enter $21,600 ($11,400 + $2,200 + $8,000), which is their standard deduction. Because line 6 is greater than zero, they must complete Schedule L (Form 1040A or 1040) and attach it to their return.