home
***
CD-ROM
|
disk
|
FTP
|
other
***
search
/
ShareWare OnLine 2
/
ShareWare OnLine Volume 2 (CMS Software)(1993).iso
/
finance
/
ttool92.zip
/
CHAPT20.DOC
< prev
next >
Wrap
Text File
|
1992-12-12
|
16KB
|
352 lines
Chapter 20. Standard Deduction
Important Changes for 1992
Increase in standard deduction. The standard deduction for taxpayers who do
not itemize deductions on Schedule A of Form 1040 is higher in 1992 than it
was in 1991. The amount depends upon your filing status.
Itemized deductions. The amount you may deduct for itemized deductions is
limited if your adjusted gross income is more than $105,250 ($52,625 if you
are married filing separately). See Chapter 21 for more information.
Introduction
This chapter discusses:
∙ Who can take the standard deduction
∙ How to figure the amount of your standard deduction
∙ What additional amounts there are for age or blindness
∙ How to claim the standard deduction on your return
∙ What different rules apply to dependents
∙ Whether to take the standard deduction or to itemize your deductions
The standard deduction is a dollar amount that reduces the amount of income on
which you are taxed.
The standard deduction is a benefit that eliminates the need for many
taxpayers to itemize actual deductions, such as medical expenses, charitable
contributions, or taxes, on Schedule A of Form 1040. If you have a choice,
you should use the method that gives you the lower tax.
Figuring the Amount
Most taxpayers have a choice of either taking a standard deduction or
itemizing their deductions.
Persons not eligible for the standard deduction. Your standard deduction is
zero and you should itemize any deductions you have if:
1) You are married and filing a separate return, and your spouse itemizes
deductions,
2) You are filing a tax return with a short tax year, or
3) You are a nonresident or dual-status alien during the year. You are
considered a dual-status alien if you were both a nonresident alien
and a resident alien during the year.
Note. If you are a nonresident alien who is married to a U.S. citizen or
resident at the end of 1992, you can choose to be treated as a U.S. resident
for 1992. (See Publication 519.) You may take the standard deduction that
applies to you.
Dependents may have a limited standard deduction. If you can be claimed as a
dependent on another person's return (such as your parents' return), your
standard deduction may be limited. See Standard Deduction for Dependents,
later.
You benefit from the standard deduction if your standard deduction is more
than the total of your allowable itemized deductions.
The standard deduction amounts for most taxpayers are shown on the Standard
Deduction Chart For Most People in this chapter.
The amount of the standard deduction for a decedent's final 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 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 may take a higher standard deduction for 1992
if your 65th birthday was on or before January 1, 1993.
See the Standard Deduction Chart For People Age 65 Or Older Or Blind in this
chapter to figure the standard deduction amount you are entitled to.
Higher standard deduction for blindness. 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 as shown in the Standard Deduction Chart For People Age 65
Or Older Or Blind. You qualify for this benefit if you are totally or partly
blind.
Totally blind. If you are totally blind, attach a statement to this effect
to your return.
Partly blind. If you are partly blind, you must submit with your return each
year a certified statement from an eye physician or registered optometrist
that:
1) You cannot see better than 20/200 in the better eye with glasses or
contact lenses, or
2) Your field of vision is not more than 20 degrees.
If your eye condition will never improve beyond these limits, you can avoid
having to get a new certified statement each year by having the examining eye
physician include this fact in the certification you attach to your return. In
later years just attach a statement referring to the certification. You should
keep a copy of the certification 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 may
take the higher standard deduction for blindness if you otherwise qualify.
Spouse 65 or older or blind. You may take the higher standard deduction if
your spouse is age 65 or older or blind and:
1) You file a joint return, or
2) You file a separate return, and your spouse had no gross income and could
not be claimed as a dependent by another taxpayer.
Note. You may not claim the higher standard deduction for an individual, other
than your spouse, for whom you can claim an exemption.
Example 1. Larry, 45, and Donna, 42, are filing a joint return for 1992.
Neither is blind. They decide not to itemize their deductions. Their
standard deduction is $6,000.
Example 2. Assume the same facts as in Example 1, except that Larry is blind
at the end of 1992. Larry and Donna's standard deduction is $6,700.
Example 3. Bill and Terry are filing a joint return for 1992. Both are over
age 65. Neither is blind. If they do not itemize deductions, their standard
deduction is $7,400.
How to report. After you find your standard deduction amount, enter it on line
19 of Form 1040A or line 34 of Form 1040. If you use Form 1040EZ, combine your
standard deduction with your personal exemption and enter it on line 4. If the
total of your standard deduction and personal exemption is more than $5,900,
you must file Form 1040A or Form 1040.
Caution. If you are married filing a separate return and your spouse itemizes
deductions, or if you are a dual-status alien, you cannot take the standard
deduction even if you were 65 or older or blind.
1992 STANDARD DEDUCTION CHART FOR MOST PEOPLE
DO NOT use this chart if you were 65 or older or blind, OR if
someone can claim you as a dependent.
Your standard
If your Filing Status is: deduction is:
Single ........................................ $3,600
Married filing joint return or Qualifying
widow(er) with dependent child ................ $6,000
Married filing separate return ................ $3,000
Head of household ............................. $5,250
1992 STANDARD DEDUCTION CHART FOR PEOPLE AGE 65 OR OLDER OR BLIND
If someone can claim you as a dependent, use the worksheet below, instead.
If you were 65 or older or blind, check the correct number of boxes below.
Then go to the chart.
You 65 or older ____ Blind ____
Your spouse, if claiming
spouse's exemption 65 or older ____ Blind ____
Total number of boxes you checked .............. ____
If your Filing Status is: and the number in Your standard
the box above is: deduction is:
Single 1 ..................... $4,500
2 ..................... 5,400
Married filing joint 1 ..................... $6,700
return or Qualifying 2 ..................... 7,400
widow(er) with dependent 3 ..................... 8,100
child 4 ..................... 8,800
Married filing separate 1 ..................... $3,700
return 2 ..................... 4,400
3 ..................... 5,100
4 ..................... 5,800
Head of household 1 ..................... $6,150
2 ..................... 7,050
STANDARD DEDUCTION WORKSHEET FOR DEPENDENTS
Use this worksheet ONLY if someone can claim you as a dependent (Keep for your
records)
If you were 65 or older or blind, check the correct number of boxes below.
Then go to the chart.
You 65 or older ____ Blind ____
Your spouse, if claiming
spouse's exemption 65 or older ____ Blind ____
Total number of boxes you checked ............ ____
1.Enter your earned income (if none, enter 0) .... 1.__________
2.Minimum amount ................................. 2. $600
__________
3.Compare the amounts on lines 1 and 2.
Enter the larger of the two amounts ............ 3.__________
4.Enter the amount shown below for your
filing status.
Single, enter $3,600
Married filing separate return, enter $3,000
Married filing jointly or Qualifying widow(er)
with dependent child, enter $6,000 ........ 4.__________
Head of household, enter $5,250
5.Standard deduction.
a. Compare the amounts on lines 3 and 4. Enter the
smaller of the two amounts. If under 65 and not
blind, stop here. This amount is your standard
deduction. Otherwise, go on to line 5b ....... 5a.__________
b. If 65 or older or blind, multiply $900 ($700
if married filing a joint or separate return,
or qualifying widow(er) with dependent child)
by the total number of boxes you checked above.
Enter the result ............................. 5b.__________
c. Add lines 5a and 5b. Enter the total.
This is your standard deduction .............. 5c.__________
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 (a) $600,
or (b) the individual's earned income for the year (but not more than the
regular standard deduction amount, generally $3,600).
However, if you are a dependent who is 65 or older or blind, your standard
deduction may be higher.
If you are a dependent, use the Standard Deduction Worksheet For Dependents
in this chapter to determine your standard deduction.
Earned income is salaries, wages, professional fees, and other amounts
received as pay for work you actually perform.
Earned income includes any part of a scholarship or fellowship grant that
you must include in your gross income. See Scholarship and Fellowship Grants
in Chapter 13 for more information on what qualifies as a scholarship or
fellowship grant.
After you find your standard deduction amount, enter it on line 19 of Form
1040A or line 34 of Form 1040. If you use Form 1040EZ, figure your standard
deduction on the back of the form and enter it on line 4. If your standard
deduction is more than $3,600, you must file Form 1040A or Form 1040.
Example 1. Michael, who is single, is claimed as a dependent on his parents'
1992 tax return. He has interest income of $700 and wages of $150. He has
no itemized deductions. Michael uses the Standard Deduction Worksheet For
Dependents to find his standard deduction. It is $600 because the greater
of $600 or his earned income ($150) is $600.
Example 2. Joe, a 22-year-old full-time college student, is claimed as a
dependent on his parents' 1992 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 $3,100. He has no itemized
deductions. Joe finds his standard deduction by using the Standard Deduction
Worksheet For Dependents. He enters his earned income, $3,100, on line 1. On
line 3 he enters $3,100, the larger of his earned income ($3,100) or $600.
Since Joe is married filing a separate return, he enters $3,000 on line 4. On
line 5a he enters $3,000 as his standard deduction because it is smaller than
$3,100, his earned income.
Example 3. Amy, who is single, is claimed as a dependent on her parents' 1992
tax return. She is 18 years old and blind. She has interest income of $950
and wages of $3,000. She has no itemized deductions. Amy uses the Standard
Deduction Worksheet For Dependents to find her standard deduction. She enters
her wages of $3,000 on line 1. On line 3 she enters $3,000, the larger of her
wages on line 1 and the $600 on line 2. Since she is single, Amy enters $3,600
on line 4. She enters $3,000 on line 5a. This is the smaller of the amounts on
lines 3 and 4. Because she checked one box in the top part of the worksheet,
she enters $900 on line 5b. She then adds the amounts on lines 5a and 5b and
enters her standard deduction of $3,900 on line 5c.
Who Should Itemize
Some taxpayers should itemize their deductions because it will save them
money. Others should itemize because they do not qualify for the standard
deduction, as discussed earlier under Persons not eligible for the standard
deduction.
Persons who should itemize deductions. If the total of your itemized deductions
is more than the standard deduction to which you otherwise would be entitled,
you should itemize your deductions. 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.
You may be subject to a limit on some of your itemized deductions if
your adjusted gross income (AGI) is more than $105,250 ($52,625 if you are
married filing separately). See Chapter 21 and the instructions for Schedule
A (Form 1040), line 26, for more information on figuring the correct amount
of your itemized deductions.
When to itemize. You may benefit from itemizing your deductions on Schedule
A of Form 1040 if you:
1) Do not qualify for the standard deduction, or the amount you can claim is
limited,
2) Had large uninsured medical and dental expenses during the year,
3) Paid interest and taxes on your home,
4) Had large unreimbursed employee business expenses or other miscellaneous
deductions,
5) Had large casualty or theft losses not covered by insurance,
6) Had large moving expenses,
7) Made large contributions to qualified charities, or
8) Have total itemized deductions that are more than the highest standard
deduction to which you otherwise are entitled.
These deductions are explained in Chapters 22-30.
If you decide to itemize your deductions, complete Schedule A and attach it to
your Form 1040. Enter the amount from Schedule A, line 26, on Form 1040, line
34.
Itemizing for state tax purposes. If you itemize even though your itemized
deductions are less than the amount of your standard deduction, write "IE"
(itemized elected) on the dotted line to the left of line 34 (Form 1040).
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 may 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.
If you are married and filed separate returns, you may 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 lowest total tax,
even though one of you may pay more tax than the other. 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).
