Chapter 13
Claiming the Standard Deduction or Itemized Deductions

Claim the standard deduction only if it exceeds your allowable itemized deductions for mortgage interest, property taxes, medical costs, charitable donations, casualty losses, and miscellaneous deductions for job costs and investment expenses. Generally, a single person and a married person filing separately, may claim a 2017 standard deduction of $6,350; a head of household, $9,350; and a married couple filing jointly or a qualifying widow/widower, $12,700. Larger standard deductions are allowed to individuals who are age 65 or older or blind, and lower standard deductions are allowed to dependents with only investment income.

Before deciding whether to itemize or claim the standard deduction, read Chapters 14 through 20 to see that you have not overlooked any itemized deductions. To itemize, you must file Form 1040 and report your deductions on Schedule A. High-income taxpayers may have a portion of their itemized deductions disallowed (13.7).

13.1 Claiming the Standard Deduction

On your 2017 Form 1040, 1040A, or 1040EZ, you are allowed a standard deduction, which is an “automatic” deduction you may claim regardless of your actual expenses. The standard deduction reduces adjusted gross income (AGI).

If you file Form 1040, choose the standard deduction if it exceeds the itemized deductions that could be claimed on Schedule A. Claim the standard deduction only if it exceeds your allowable itemized deductions for charitable donations, certain local taxes, interest, allowable casualty losses, miscellaneous expenses, and medical expenses. If your deductions exceed your standard deduction, you elect to itemize by claiming the deductions on Schedule A of Form 1040. However, if you are married filing separately and your spouse itemizes deductions on his or her return, you also must itemize on your return, even if the standard deduction exceeds your itemized deductions (13.3).

Basic standard deduction. You can claim the basic standard deduction if you are under age 65 and not blind. The amount is adjusted each year to reflect inflation. For 2017, the basic standard deduction is:

• $12,700 if married filing jointly or a qualifying widow/widower;
• $9,350 if filing as a head of household; and
• $6,350 if single or married filing separately.

If you are married filing separately, you must itemize deductions and may not claim any standard deduction if your spouse itemizes on a separate return (13.3).

Additional standard deduction if age 65 or older or blind. For taxpayers age 65 or over, or taxpayers of any age who are blind, the basic standard deduction is increased by an additional amount (13.4).

Dependents. Individuals under age 65 (or who are blind) who may be claimed as dependents by other taxpayers are limited to a $1,050 standard deduction for 2017, unless they have earned income (13.5). An additional deduction is allowed to dependents who are 65 or older or blind (13.4).

Dual-status alien. You are generally not entitled to any standard deduction if for part of the year you are a nonresident and part of the year a resident alien. However, a standard deduction may be claimed on a joint return if your spouse is a U.S. citizen or resident and you elect to be taxed on your worldwide income (1.5).

13.2 When To Itemize

Claim the standard deduction only if it exceeds your allowable itemized deductions for charitable donations, certain local taxes, interest, allowable casualty losses, miscellaneous expenses, and medical expenses. If your deductions exceed your standard deduction, you elect to itemize by claiming the deductions on Schedule A of Form 1040. However, if your income exceeds the applicable threshold, the total of your Schedule A itemized deductions is phased out (13.7).

If you are married filing separately and your spouse itemizes deductions, you also must itemize, even if the standard deduction exceeds your itemized deductions; see (13.3).

13.3 Spouses Filing Separate Returns

If you and your spouse file separate returns (1.3) for 2017, and neither of you is a qualifying head of household (1.12) , you must both claim itemized deductions or limit yourselves to a standard deduction of $6,350 each. You must both make the same election; when one of you itemizes the other is not entitled to any standard deduction. That is, if your spouse has itemized deductions exceeding $6,350 and elects to itemize on his separate return, you must also itemize on your separate return, even if your itemized deductions are less than $6,350 and you would therefore be better off claiming the $6,350 standard deduction.

On a separate return, each spouse may deduct only those itemized expenses for which he or she is liable and pays. This is true even if one spouse pays expenses for the other. For example, if a wife owns property, then the interest and taxes imposed on the property are her deductions, not her husband’s. If he pays them, neither one may deduct them on separate returns. The husband may not because they were not his liability. The wife may not because she did not pay them. This is true also of casualty or theft losses where the property was owned by only one of the spouses.

No restrictions if divorced or legally separated. Following a divorce or legal separation under a decree of divorce or separate maintenance, you and your former spouse are free to compute your tax as you each see fit, without reference to the way the other files. Both of you are treated as single. If you have itemized deductions, you may elect to claim them, and your former spouse is not required to itemize. Head of household tax rates may be available if certain requirements are met (1.12).

Head of household possibility if you live apart from your spouse. If you are separated but do not have a decree of divorce or separate maintenance, both of you must either itemize or claim the standard deduction of $6,350 for 2017 if you file separately. However, you may file your 2017 return as a head of household (1.12) and may choose between a standard deduction of $9,350 (if under age 65 and not blind) and itemizing your deductions if you are married and live apart from your spouse and meet the following conditions:

• Your spouse was not a member of your household during the last six months of 2017.

• You paid over half of the costs of maintaining a home that for more than half of 2017 was the principal residence for you and a qualifying child or qualifying relative whom you may claim as your dependent. See Test 2 at 1.12 for details.

If you meet these tests and file as a head of household, you may elect to itemize whether your spouse itemizes or not. If you elect not to itemize, your 2017 standard deduction as a head of household is $9,350 if you are under age 65 and not blind. If you are age 65 or over or blind, your standard deduction is increased by $1,550 (13.4). The filing status of your spouse remains married filing separately. He or she must itemize deductions if you itemize. If you claim the $9,350 standard deduction for a head of household (or $10,900 if age 65 or older, or blind), your spouse can itemize or claim the $6,350 standard deduction for married persons filing separately.

13.4 Standard Deduction If 65 or Older or Blind

A larger standard deduction is provided for persons who are age 65 or over or who are blind. The larger deduction for blindness is allowed regardless of age.

For purposes of the 2017 standard deduction, blindness and age are determined as of December 31, 2017. However, if your 65th birthday is January 1, 2018, the IRS treats you as reaching age 65 on the last day of 2017, allowing you to claim on your 2017 return the additional standard deduction for those age 65 or older.

If you are age 65 or older or blind for 2017, you may claim an additional standard deduction of $1,550 if you file as a single person or head of household, or $1,250 if your filing status is married filing jointly, married filing separately, or qualifying widow/widower. Keep in mind that if you are married filing separately, you are only allowed to claim the standard deduction if your spouse also claims the standard deduction on his or her own return (13.3).

You can use Worksheet 13-1 to figure your standard deduction for 2017.

Check applicable boxes

13.5 Standard Deduction for Dependents

If someone can claim you as their dependent for 2017 under the tests at (21.1), your standard deduction is determined under the following rules. You may elect to itemize deductions if these exceed the allowable standard deduction. If you are married and your spouse itemizes on a separate return, you must itemize (13.3).

Dependent under age 65 and not blind. Your standard deduction for 2017 is the greater of (1) $1,050, or (2) your earned income plus $350, but no more than the basic standard deduction for your filing status (13.1). Thus, if you can be claimed as a dependent for 2017 and you do not have earned income or your earned income is $700 or less, you may claim a standard deduction of $1,050 for 2017.

Dependents age 65 or older or blind. Your standard deduction for 2017 consists of two parts. First, you can deduct the greater of $1,050 or your earned income plus $350, but no more than the basic standard deduction for your filing status (13.1). You then add $1,250 if you are married filing jointly or married filing separately, or $1,550 if single or head of household. Double the $1,250 or $1,550 amount if you are age 65 or older and also blind.

13.6 Prepaying or Postponing Itemized Expenses

Before the end of the year, check your records for payments of deductible itemized expenses. If you find that your payments up to that time are slightly less than the allowable standard deduction for that year, accelerating payment of an expense that you would otherwise pay in the following year could allow you to itemize. For example, at the end of 2017, you may make an additional charitable contribution, or pay a state or local tax bill not due until 2018, or extend by one year professional association dues or job-related subscriptions. However, you cannot deduct prepayments of interest, insurance premiums, or rent on investment property. Also, there is no tax advantage to prepaying state or local taxes if you are either subject to AMT or the deduction will make you subject to AMT for 2017 (23.2). Finally, a prepayment may not increase your deduction as much as you expect if you are subject to the overall reduction of itemized deductions discussed below (13.7).

If making a year-end payment would not increase your deductions enough to itemize,you would get no tax benefit from the payment. By postponing the payment until the next year, you may make it easier to itemize on that year’s return.

If your year-to-year payments of itemized expenses have consistently been below the standard deduction, a prepayment or postponement strategy may allow you to itemize in at least one of two consecutive years, enabling you to reduce your taxes over the two-year period without increasing your overall expenditures.

13.7 Itemized Deductions Reduced for Higher-Income Taxpayers

Most but not all itemized deductions (see below) are subject to an overall reduction rule if your income exceeds the annual threshold for your filing status. For 2017, the reduction rule applies if your adjusted gross income (AGI) exceeds:

* $313,800 if you are married filing jointly or a qualifying widow/widower

* $287,650 if a head of household

* $261,500 if single

* $156,900 if married filing separately

For 2018, the thresholds will likely get an inflation adjustment; see the e-Supplement at jklasser.com.

How does the disallowance rule work? The following itemized deductions are not subject to the reduction: medical and dental expenses, investment interest, casualty/theft losses, and gambling losses. Thus, if these are the only itemized deductions you claim, you are not affected by the disallowance rule. You may deduct on Schedule A the amount allowable under the regular rules, taking into the limitations for these types of expenses (such as the AGI floors for medical expenses (17.1) and casualty losses (18.12) ).

All other allowable itemized deductions—including state and local income taxes, real estate taxes, mortgage interest, charitable contributions, and miscellaneous deductions—will be subject to the disallowance rule if your AGI exceeds the threshold amount. The deductions will be reduced by 3% of the excess of your AGI over the threshold. If your AGI is extremely high, the 3% reduction applies until 80% of the deductions are eliminated. Since the reduction cannot exceed 80%, there cannot be a complete phaseout of itemized deductions; a minimum of 20% is protected from disallowance.

Worksheet 13-3 can be used to figure the reduction for 2017 deductions. The example above the worksheet illustrates the computation.