About The Standard Tax Deduction

Taxes can be stressful and costly, but thankfully there is a standard deduction we can all take. The standard tax deduction is a safety valve. It reduces the taxable amount by a flat sum. However, you need to see what benefits you more – standard tax deduction or itemised deduction. The latter is available on a range of items like medical expenses, charitable payments, mortgage interest, etc. Under the federal law you can avail only one of the two.

The deduction slabs are usually revised every year so that the tax benefit keeps pace with inflation. The actual deduction, however, varies with the filing status of the individual.

Thus, the standard deduction available to a single individual in 2004 was $4,850; for the head of household it was $7,150; for a married couple filing a joint return it was $9,700; for a qualifying widow(er) with dependent child it was $9,500; and for a married couple filing separate returns it was $4,850.

The law also provides for higher deduction to taxpayers who are more than 65 years old or those who are blind. Those whose spouses are 65 years old or more or blind can also claim a higher deduction.

As against this, those who feature in someone else’s deductions get a lesser deduction. There is a clause for students too: scholarships and grants are considered income and they must keep it in mind while asking for deductions.

The benefit is not available to those who are married but whose spouse itemizes deductions; those who file a tax return for a short tax year because of a change in their annual accounting period; and to those whose status is that of a non-resident or dual-status alien. However, if you are a non-resident alien who is married to a U.S. citizen and choose to be treated as a US resident then you can avail the standard deduction.

The next time you file your returns, take a close look at the standard deduction you are entitled to. It could work better and simpler than the itemized approach.

  • Landlords Be Sure To Use The Rental Property Tax Deduction
    If you own an apartment house or rent out single family homes, then you can put some money back in your pocket on tax day by using the rental property tax deduction properly. If you are a landlord then you must make sure that you avail full benefits that rental property tax deduction provides. You will be surprised as to the number of heads under which you can avail these benefits. These include rent, payment to cancel a lease, expenses paid by the renter and so on. ...

  • Getting The Most Out Of Your Medical Expense Tax Deduction
    To get the most out of your money, you want to be sure you make full use of your medical tax deduction benefits this year when you are preparing your taxes. There are few taxpayers who are fully aware of the different heads under which the medical expense tax deduction is available. Those who know make full use of it to cover large portions of their medical bills. They know that they can deduct medical costs as long as it is more than 7.5 percent of their adjusted gross income The ot ...

  • Dont Forget About The Hybrid Car Tax Deduction
    A hybrid car can not only be good for the environment but it can be good for your taxes too! The hybrid car tax deduction enables owners of a hybrid vehicle – that is cars that have a gasoline-powered engine and an electric motor -- to claim a one-time tax relief on their federal income tax returns. This deduction, which has been provided under the Working Families Tax Relief Act of 2004, is a one-time deal. The deduction can be availed by those car owners who bought their cars in 2 ...