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Standard Deductions and Exemptions for Federal Income Tax

This article was written by in Featured, Taxes. 23 comments.


Most taxpayers can choose between itemizing tax deductions to reduce taxable income, which requires accurate record-keeping and support, and taking the standard deduction. The standard tax deduction is a fixed amount that reduces the amount of money on which taxpayers owe the federal government. Generally, if you can show that you’ve had more deductible expenses than the amount of the default standard deduction, it’s better to itemize.

IRS publication 501 outlines each year’s deduction amounts. There are some cases where adjustments should be made to the standard deduction. For example, if you are 65 or older, or if you are blind, the standard deduction increases.

To lower your tax burden this year by up to $5,000, consider opening up an IRA (Individual Retirement Account). Mint.com has an IRA wizard that can show you what kind of IRA to open and where to open it.

The personal exemption is another deduction to your income that you can take for yourself and for any dependents.

2012 2011 2010 2009
Single $5,950 $5,800 $5,700 $5,700
Married filing jointly $11,900 $11,600 $11,400 $11,400
Married filing separately $5,950 $5,800 $5,700 $5,700
Head of household $8,700 $8,500 $8.400 $8,350
Personal exemption $3,800 $3,750 $3,650 $3,650

Note: When you file taxes in April 2012, you’re filing for 2011 income, so review the numbers in the 2011 column and understand the federal tax brackets. The numbers for 2012 are predicted and are not yet official.

A dependent child can increase the standard deduction by $950 or the amount of earned income plus $300, whichever is greater. That increase has a maximum of $5,700.

Do you itemize your tax deductions or take the standard deduction?

Updated October 24, 2011 and originally published January 5, 2011. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 23 comments… read them below or add one }

avatar SteveDH

The standard deduction is about all you get when you’re retired. With the exception of one year where Medical Expenses (Dental expenses not covered by Medical Insurance) exceeded the standard deduction, all of my filings have been based on the standard deduction. But I’m looking forward to taking more exemptions when I turn 65 in a couple of years – followed by my wife a couple of years later. I guess those extra exemptions are like having a nice scenic view appear on your way downhill… :-)

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avatar rewards ♦31 (Newbie)

I itemize mainly due to high property taxes.

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avatar cstrunk ♦140 (Cent)

I’m young (early 20s) and a renter, so I don’t think I’ll be itemizing anytime soon. It’s all about the adjustments and credits for me!

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avatar Anthony

I itemize as well due to mortgage interest and student loan interest.

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avatar Mike Fanelli

We definitely itemize. This is primarily driven by owning a home, which includes interest expense and property taxes that are included in the itemized deductions.

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avatar nimrodel ♦42 (Newbie)

I’ve always just taken the standard deduction, mostly because I’ve used online software to file my taxes and the itemized deductions always seemed so complicated, I was afraid I would make some sort of mistake.

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avatar kurt.moeller ♦110 (Cent)

I let an accountant handle it, between that and a small business it is simpler letting a professional decide what the best option is for me. That way I don’t have to worry as much that there is a mistake present!

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avatar Retired Navy Couple

Concur with the above posting 110%!

We pay our CPA/Tax Preparer $275/year (that’s just 75 CENTS/day annualized!) to prep & submit (electronically) BOTH our Fed & State personal income taxes – it’s always money well invested!

While his fee is not deductible (we’re fully retired) – his expertise ensures our income & deductions are correct. He reviews ALL associated supporting paperwork for accuracy (e.g., 1099-Rs, investment gains/losses, mortgage interest & property tax verifications, non-business energy tax credits), often finding deductions we would have overlooked had we tried to do our returns ourselves. Furthermore, as a ‘signer’ attesting to his preparation work, we no longer worry about an audit as we’ll have a true professional at our side!

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avatar tbork84 ♦1,867 (Half-Dollar)

I am in the 20-something/single/renter category, so I will take the standard deduction and not worry about it. As far as I understand it, without a mortgage there are very few reasons that would justify itemizing.

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avatar mrtrend ♦152 (Cent)

I usually check which option gives me the smaller tax bill. Using an online software like Turbotax, first I do my tax using the standard deduction and I write down the final tax bill. Then I switch from standard deduction to itemize. If the new tax bill is higher, it only takes me a second to switch back to standard deduction. I always plan on itemizing (keep all my receipts) because I never know how much I will end up spending on health care.

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avatar ajonesin ♦135 (Cent)

I am a standard deduction kind of guy. I never have enough itemized deductions to match it, but I always check.

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avatar krantcents

Currently, I itemize, but expect to go to a standard deduction when I retire. If circumstance change, I change with it!

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avatar Brianne

I’ve never itemized because I’m young and rent. In fact, I’m not even sure what qualifies when you itemize.

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avatar Steve

I always take the standard deduction because I too rent. Though I am not as young as some of the others who have said this. And being married just makes the standard deduction twice as big :)

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avatar Steve

A dependent doesn’t increase the standard deduction for their parents, do they? Instead they get their own, which is equal to their earned income plus $300, but no lower than $950 and no higher than $5,800.

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avatar Kate Kashman

I figure it both ways every year and take the larger (obviously!) Because we move a lot, and sometimes live in rentals and sometimes live in houses we own, the best choice changes every year.

Just because you own a home doesn’t automatically mean that the itemized deduction is a better choice for you. If your mortgage interest is small, even including mortgage interest may not bring your itemized deductions up to the amount of the standard deduction. Plus, less paperwork with the standard deduction!

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avatar Steve

If you use tax software it will figure both and tell you which is better.

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avatar jillianb ♦275 (Nickel)

I’m a 20-something so it’s all about the standard deduction. I just started up my own company so soon there will be a whole new host of tax issues to look out for. I’m looking forward to the challenge.

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avatar faithfueledbennetts ♦264 (Nickel)

I have always taken the standard deduction in the past. Taxes are a gray foggy area for me, so it’s always nice to be eductaed on any of it!

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avatar faithfueledbennetts ♦264 (Nickel)

I have always taken the standard deduction in the past. Taxes are a gray foggy area for me, so it’s always nice to be educated on any of it!

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avatar gotr31 ♦224 (Cent)

It isn’t that hard to figure out your itemized deductions if you use tax software.

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avatar Mary Ann Wakefield

Last year I gave each of my seven children $4000 as a gift. Is that deductible?

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avatar Mary Anne Byrnes

Capital gains are taxed at a lower rate because the proceeds from the investments are used to create and/or sustain businesses that HIRE people. Also investors do not always make money. Many times they LOSE money. The lower tax rate is to give them incentive to put their money at RISK which allows more people to be HIRED. Also, LOSSES from investments are LIMITED in their deductibility, while their gains must be reported without limit.

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