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SMALL BUSINESS
Current Standard Deductions
Your standard deduction is the amount you deduct from your adjusted gross income (AGI) in order to calculate your taxable income.
The larger your deduction, the lower your taxable income and the smaller your tax liability will be.
When you file a federal income tax return (usually IRS Form 1040 or a simplified version of the form), you take either a standard deduction or you can itemize your deductions. You take the larger of the two deductions to lower your taxable income.
The IRS increases the standard deduction each year to adjust for increases in the general rate of inflation. It calculates the standard deduction by looking at the average amounts for itemized deductions that taxpayers have claimed in previous years.
However, just because you may elect to itemize your deductions doesn't always mean you should. The standard deduction is likely to be close to what your itemized deductions would be, on average, and is a heck of a lot easier to calculate.
Believe it or not, the Internal Revenue Service doesn't require a return from some people.
Who Has to File a Tax Return?
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The following table shows standard deductions for 2007 for each tax filing status. If you qualify as either blind or over age, or both, your standard deduction is larger.
Standard deductions (2007):
Source: IRS Pub. 505
Standard deductions (2007):
| Tax Filing Status |
Standard Deduction |
Blind or Over Age 65 |
Blind and Over Age 65 |
| Single | $5,350 | $6,800 | $8,150 |
| Married and filing jointly |
$10,700 | $11,950 (1 qualifying spouse) | $13,000 (1 qualifying spouse) |
| Qualifying widow(er) with dependent child |
$10,700 | $11,950 | $13,000 |
| Head of household |
$7,850 | $9,350 | $10,700 |
| Married and filing separately |
$5,350 | $6,500 (1 qualifying spouse) | $7,550 (1 qualifying spouse) |
Source: IRS Pub. 505
If you claim an exemption for a spouse who is either blind or over age 65, the amount of your standard deduction is larger. For more information on standard deductions and personal exemptions, see IRS Pub. 501. If another taxpayer claims you as an xemption on their tax return, your standard deduction may be smaller. See Pub. 501.
There are circumstances where the IRS doesn't allow you to take a standard deduction. If any of the following cases apply, you are required to itemize your deductions:
There are circumstances where the IRS doesn't allow you to take a standard deduction. If any of the following cases apply, you are required to itemize your deductions:
You are married and filing a separate return and your spouse itemizes deductions.
You are filing a tax return for less than a full year because of a change in your accounting period.
You were either a nonresident or dual-status alien during the year.
2008-07-21 17:04:00
Taxes: Basics
Anyone seeking help with taxes should start with the fundamentals. Here are the basics of taxes.
- Who Must File a Return
- Audits & Penalties
- Taxes on Capital Gains
- Withholding Your Taxes
- Common Tax Credits
- Personal Exemptions
- All About AMT Tax
- Calculate Taxable Income
- Itemizing Deductions
- Filing a Return Online
- 2008 Tax Brackets
- Standard Deductions
- How to File an Extension
