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What’s New

Standard deduction increased. The standard deduction for some taxpayers who do not itemize their deductions on Schedule A (Form 1040) is higher for 2017 than it was for 2016. The amount depends on your filing status. You can use the 2017 Standard Deduction Tables 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 your taxable income. 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 (Form 1040). The standard deduction is higher for taxpayers who:

• Are 65 or older, or
• Are blind.

Persons not eligible for the standard deduction. 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.

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 Pub. 519, U.S. Tax Guide for Aliens.) If you make this choice, you can take the standard deduction.

Standard Deduction Amount

The standard deduction amount depends on your filing status, whether you are 65 or older or blind, and whether another taxpayer can claim an exemption for you. Generally, the standard deduction amounts are adjusted each year for inflation. The standard deduction amounts for most people are shown in Table 21.1.

Decedent’s final return. 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.

Higher Standard Deduction for Age (65 or Older)

If you are age 65 or older on the last day of the year and do not itemize deductions, you are entitled to a higher standard deduction. You are considered 65 on the day before your 65th birthday. Therefore, you can take a higher standard deduction for 2017 if you were born before January 2, 1953.

Use Table 21.2 to figure the standard deduction amount.

Death of a taxpayer. If you are preparing a return for someone who died in 2017, see Death of taxpayer in Pub. 501 before using Table 21.2 or Table 21.3.

Standard Deduction for Dependents

The standard deduction for an individual who can be claimed as a dependent on another person’s tax return is generally limited to the greater of:

• $1,050, or
• The individual’s earned income for the year plus $350 (but not more than the regular standard deduction amount, generally $6,350).

However, if the individual is 65 or older or blind, the standard deduction may be higher.

If you (or your spouse, if filing jointly) can be claimed as a dependent on someone else’s return, use Table 21.3 to determine your standard deduction.

Earned income defined. Earned income is salaries, wages, tips, professional fees, and other amounts received as pay for work you actually perform.

For purposes of the standard deduction, earned income also includes any part of a taxable scholarship or fellowship grant. See Scholarships and fellowships in chapter 12 for more information on what qualifies as a scholarship or fellowship grant.

Example 1. Michael is 16 years old and single. His parents can claim an exemption for him on their 2017 tax return. He has interest income of $780 and wages of $150. He has no itemized deductions. Michael uses Table 21.3 to find his standard deduction. He enters $150 (his earned income) on line 1, $500 ($150 + $350) on line 3, $1,050 (the larger of $500 and $1,050) on line 5, and $6,350 on line 6. His standard deduction, on line 7a, is $1,050 (the smaller of $1,050 and $6,350).

Example 2. Joe, a 22-year-old full-time college student, can be claimed as a dependent on his parents’ 2017 tax return. Joe is married and files a separate return. His wife does not itemize deductions on her separate return. Joe has $1,500 in interest income and wages of $3,800. He has no itemized deductions. Joe finds his standard deduction by using Table 21.3. He enters his earned income, $3,800, on line 1. He adds lines 1 and 2 and enters $4,150 on line 3. On line 5, he enters $4,150, the larger of lines 3 and 4. Because Joe is married filing a separate return, he enters $6,350 on line 6. On line 7a he enters $4,150 as his standard deduction because it is smaller than $6,350, the amount on line 6.

Example 3. Amy, who is single, can be claimed as a dependent on her parents’ 2017 tax return. She is 18 years old and blind. She has interest income of $1,300 and wages of $2,900. She has no itemized deductions. Amy uses Table 21.3 to find her standard deduction. She enters her wages of $2,900 on line 1. She adds lines 1 and 2 and enters $3,250 ($2,900 + $350) on line 3. On line 5, she enters $3,250, the larger of lines 3 and 4. Because she is single, Amy enters $6,350 on line 6. She enters $3,250 on line 7a. This is the smaller of the amounts on lines 5 and 6. Because she checked the box in the top part of the worksheet, indicating she is blind, she enters $1,550 on line 7b. She then adds the amounts on lines 7a and 7b and enters her standard deduction of $4,800 on line 7c.

Example 4. Ed is 18 years old and single. His parents can claim an exemption for him on their 2017 tax return. He has wages of $7,000, interest income of $500, and a business loss of $3,000. He has no itemized deductions. Ed uses Table 21.1 to figure his standard deduction. He enters $4,000 ($7,000 − $3,000) on line 1. He adds lines 1 and 2 and enters $4,350 on line 3. On line 5 he enters $4,350, the larger of lines 3 and 4. Because he is single, Ed enters $6,350 on line 6. On line 7a he enters $4,350 as his standard deduction because it is smaller than $6,350, the amount on line 6.

Who Should Itemize

You should itemize deductions if your total deductions are more than the standard deduction amount. Also, you should itemize if you do not qualify for the standard deduction, as discussed earlier under Persons not eligible for the standard deduction.

You should first figure your itemized deductions and compare that amount to your standard deduction to make sure you are using the method that gives you the greater benefit.

When to itemize. You may benefit from itemizing your deductions on Schedule A (Form 1040) if you:

• Do not qualify for the standard deduction, or the amount you can claim is limited,
• Had large uninsured medical and dental expenses during the year,
• Paid interest and taxes on your home,
• Had large unreimbursed employee business expenses or other miscellaneous deductions,
• Had large uninsured casualty or theft losses,
• Made large contributions to qualified charities, or
• Have total itemized deductions that are more than the standard deduction to which you otherwise are entitled.

These deductions are explained in chapters 22–29.

If you decide to itemize your deductions, complete Schedule A and attach it to your Form 1040. Enter the amount from Schedule A, line 29, on Form 1040, line 40.

Electing to itemize for state tax or other purposes. Even if your itemized deductions are less than your standard deduction, you can elect to itemize deductions on your federal return rather than take the standard deduction. You may want to do this if, for example, the tax benefit of itemizing your deductions on your state tax return is greater than the tax benefit you lose on your federal return by not taking the standard deduction. To make this election, you must check the box on line 30 of Schedule A.

Changing your mind. If you do not itemize your deductions and later find that you should have itemized—or if you itemize your deductions and later find you should not have—you can change your return by filing Form 1040X, Amended U.S. Individual Income Tax Return. See Amended Returns and Claims for Refund in chapter 1 for more information on amended returns.

Married persons who filed separate returns. You can change methods of taking deductions only if you and your spouse both make the same changes. Both of you must file a consent to assessment for any additional tax either one may owe as a result of the change.

You and your spouse can use the method that gives you the lower total tax, even though one of you may pay more tax than you would have paid by using the other method. You both must use the same method of claiming deductions. If one itemizes deductions, the other should itemize because he or she will not qualify for the standard deduction. See Persons not eligible for the standard deduction, earlier.