Itemized and Standard Deductions: Elements of Income Tax Filings

Itemized and Standard Deductions: Elements of Income Tax Filings in the United States of America

Itemized and standard deductions are important elements of income tax filings in the United States of America (USA). In the determination of taxable income, both deductions help to minimize tax obligations.

Whereas the Internal Revenue Service (IRS) prescribes itemized deductions in qualitative terms, it defines standard deductions as monetary values. Itemized deductions include

  • charitable contributions,

  • uninsured dental and medical expenses,

  • interest or taxes on mortgages for primary residences,

  • uninsured casualty and theft losses,

  • gambling losses,

  • employees’ unreimbursed job expenses,

  • state and local income taxes or sales taxes and

  • state and local property taxes.

Standard deductions vary in value, according to the taxpayer’s income tax status. To compensate for inflation, the IRS annually increases the values of standard deductions. Some of these current values are in Exhibit 1 on the following page; they originate from the IRS website at http://www.irs.gov/uac/How-Much-is-My-Standard-Deduction%3F.

EXHIBIT 1

STANDARD DEDUCTIONS

TAX YEAR 2013

 

 

   

 

STANDARD DEDUCTION (US$)

TAXPAYER’S FILING STATUS

BASIC

ADDITIONAL

 

 

BLINDNESS

AGE 65 YEARS OR MORE

Single

6,100

1,500.00

1,500.00

Head of household

8,950

1,500.00

1,500.00

Married filing jointly

12,200

1,200.00

1,200.00

Qualifying widow or widower

12,200

1,200.00

1,200.00

Married filing separately

6,100

1,200.00

1,200.00

Exhibit 1 shows that besides being entitled to the applicable basic standard deductions, some taxpayers qualify for additional allowances if they are blind or aged sixty-five years or more. These additional standard deductions do not apply to itemized deductions.

Tax filers may claim standard deductions only if they qualify for them. On account of their immigration status, non-resident aliens and dual citizens cannot claim standard deductions. Non-resident aliens, if married to American citizens or residents at the end of the tax year, may opt to be treated as residents and thus would be entitled to standard deductions. Taxpayers cannot claim standard deductions for tax periods shorter than twelve months because of accounting changes. Partnerships, common trust funds, trusts and estates are ineligible for standard deductions.

Heads of households, American citizens, married resident aliens and unmarried resident aliens are entitled to either standard deductions or itemized deductions. If they utilize itemized deductions in their income tax filings, they cannot claim standard deductions; the reverse applies. Each of these taxpayers usually claims the greater of the aggregate itemized or standard deduction. For itemized deductions, taxpayers must maintain supporting documents and other records. These items are not required for standard deductions. Married spouses who file separate income tax returns must choose the same type of deduction; spouses cannot simultaneously choose itemized and standard deductions. Changes in their deduction types must result in the spouses having the same deduction type. The spouses are obliged to file their consent to assessment for any new individual tax liability resulting from the changes.

Taxpayers claim their standard or itemized deductions by entering appropriate values on Line 40 of their Forms 1040. Each taxpayer’s completed Schedule A (Form 1040) or Schedule A (Form 1040NR) supports itemized deductions; for standard deductions, the entry on Line 40 is the sole requirement.