MODULE 5: standard deduction

Taxpayer Standard Deduction Overview

• Standard deduction amounts are provided by tax law and adjusted for inflation each year.

Basic Standard Deduction Amounts for 2024

• Single Taxpayer: $14,600

• Married Filing Jointly: $29,200

• Married Filing Separately: $14,600

• Head of Household: $21,900

Additional Standard Deductions

• Certain taxpayers may qualify for additional standard deductions:

  • Taxpayers who are blind or aged 65 or over.

  • Single Taxpayer:

    • Max 2 additional deductions if both conditions (blind and 65+) are met.

  • Married Filing Jointly:

    • Max 4 additional deductions if both spouses meet the criteria.

Values of Additional Standard Deductions

• Single or Unmarried Taxpayers: $1,950 per additional deduction.

• Married or Qualifying Widow/Widower: $1,550 per additional deduction.

Example Calculation: Marley's Standard Deduction

• Taxpayer: Marley, age 70, single.

• Itemized Deductions Total: $14,500.

• Basic Standard Deduction: $14,600.

• Additional Standard Deduction: 1 for being age 65 or over.

• Total Additional Standard Deduction Value: $1,950.

• Total Standard Deduction Calculation:

  • Basic Standard Deduction ($14,600) + Additional Standard Deduction ($1,950) = $16,550.

• Conclusion: Marley would likely use the standard deduction for 2024 as it exceeds itemized deductions.

Comparing Deductions

• Taxpayers must compare total standard deduction amounts against their itemized deductions.

• They can choose the larger deduction each year between itemized or standard.

Important Note

• Do not add the additional standard deduction to the itemized deduction amount.

Special Case: Dependents

• Taxpayers who are dependents calculate their standard deduction using a different formula:

  • Greater of $1,300 or earned income + $450,

  • Capped at the basic standard deduction for the year, which is $14,600 for 2024 (single).

Example Calculation: Malik's Standard Deduction

• Taxpayer: Malik, age 17, dependent on parents.

• Earned Income: $4,000.

• Investment Income: $3,500.

• Standard Deduction Calculation:

  • Earned Income + $450: $4,000 + $450 = $4,450.

  • Compare with $1,300.

  • Total Standard Deduction for Malik: $4,450 (greater than $1,300).

Malik's Taxable Income Calculation

• Total Income: $4,000 + $3,500 = $7,500.

• Adjusted Gross Income (AGI): $7,500.

• Deductions: Use the standard deduction of $4,450 (no itemized deductions or QBI deductions).

• Taxable Income Calculation:

  • AGI ($7,500) - Standard Deduction ($4,450) = $3,050.

• Conclusion: Malik's taxable income for 2024 is $3,050.