Most taxpayers have a choice of taking a standard deduction or itemizing their deductions. You benefit from the standard deduction
if your standard
deduction is more than the total of your allowable itemized deductions. If you have a choice, you should use the method that
gives you the lower tax.
Standard Deduction
The standard deduction is a dollar amount that reduces the amount of income on which you are taxed. It is a benefit that eliminates
the need for
many taxpayers to itemize actual deductions. The standard deduction is higher for taxpayers who are age 65 or older or blind.
The standard deduction amounts for most taxpayers under age 65 are shown in Table 4-1.
Persons not eligible for the standard deduction.
Your standard deduction is zero and you should itemize any deductions you have if:
You are married and filing a separate return, and your spouse itemizes deductions,
You are filing a tax return for a short tax year because of a change in your annual accounting period, or
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.
If you are a nonresident alien who is married to a U.S. citizen or resident at the end of the year, you can choose
to be treated as a U.S.
resident. See Publication 519, U.S. Tax Guide for Aliens. If you make this choice, you can take the standard deduction.
Higher standard deduction for age 65 or older.
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 can take the higher standard deduction for 2005 if you were born before January 2,1941.
Use Table 4-2 to find the amount of your standard deduction.
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. Use Table 4-2 to
find the amount. You qualify for this benefit if you are totally or partly blind.
Partly blind.
If you are partly blind, you must get a certified statement from an eye physician or registered optometrist that:
You cannot see better than 20/200 in the better eye with glasses or contact lenses, or
Your field of vision is not more than 20 degrees.
If your eye condition will never improve beyond these limits, the statement should include this fact. You must keep
the statement 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 can take the higher standard deduction for blindness if you otherwise qualify.
Spouse 65 or older or blind.
You can take a higher standard deduction if your spouse is age 65 or older or blind and:
You file a joint return, or
You file a separate return and can claim an exemption for your spouse because your spouse had no gross income and an exemption
for your
spouse could not be claimed by another taxpayer.
You cannot claim the higher standard deduction for an individual other than yourself and your spouse.
Decedents.
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.
Examples.
The following examples illustrate how to determine your standard deduction using Tables 4-1 and 4-2.
Example 1.
Larry, 66, and Donna, 67, are filing a joint return for 2005. Neither is blind. They decide not to itemize their deductions.
They use Table 4-2.
Their standard deduction is $12,000.
Example 2.
Assume the same facts as in Example 1 except that Larry is blind at the end of 2005. They use Table 4-2. Larry and Donna's
standard deduction is
$13,000.
Example 3.
Susan, 67, who is blind, qualifies as head of household in 2005. She has no itemized deductions. She uses Table 4-2. Her standard
deduction is
$9,800.
Additional exemption amount for housing individuals displaced by Hurricane Katrina.In 2005 and 2006, you may be able to take an additional $500 exemption, up to $2,000, for each displaced person
you shelter because of Hurricane Katrina. See Publication 4492 for more information about the requirements and limitations.
Standard Deduction for Dependents
The standard deduction for an individual for whom an exemption can be claimed on another person's tax return generally is
limited to the greater
of:
$800, or
The individual's earned income for the year plus $250 (but not more than the regular standard deduction amount, generally
$5,000).
However, if the individual is age 65 or older or blind, his or her standard deduction may be higher. Use Table 4-3 to determine
his or her
standard deduction.
2005 Standard Deduction Tables
If you are married filling 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 born before January 2, 1941, or you are blind.
Table 4-1. Standard Deduction Chart for Most People*
IF your filing status is...
THEN your standard deduction is...
Single or Married filing separately
$5,000
Married filing jointly or Qualifying widow(er) with dependent child
10,000
Head of household
7,300
* Do not use this chart if you were born before January 2, 1941, or you are blind, or if someone else can claim an exemption
for you (or your spouse if married filing jointly). Use Table 4-2 or 4-3 instead.
Table 4-2. Standard Deduction Chart for People Born Before January 2, 1941, or Who are Blind*
Check the correct number of boxes below. Then go to the chart.
You
Born before January 2, 1941
Blind
Your spouse, if claiming spouse's exemption
Born before January 2, 1941
Blind
Total number of boxes you checked
IF your
filing status is...
AND the number in the box above is...
THEN your standard deduction is...
Single
1
$6,250
2
7,500
Married filing jointly or
1
11,000
Qualifying widow(er)
2
12,000
with dependent child
3
13,000
4
14,000
Married filing
1
6,000
separately
2
7,000
3
8,000
4
9,000
Head of household
1
8,550
2
9,800
* If someone can claim an exemption for you (or your spouse if married filing jointly), use Table 4-3,
instead.
Table 4-3. Standard Deduction Worksheet for Dependents
Use this worksheet only if someone else can claim an exemption for you (or your spouse if married filing jointly).
If you were born before January 2, 1941, or you are blind, check the correct number of boxes below. Then go to the
worksheet.
You
Born before January 2, 1941
Blind
Your spouse, if claiming spouse's exemption
Born before January 2, 1941
Blind
Total number of boxes you checked
1.
Enter your earned income (defined below). If none, enter -0-.
1.
2.
Additional amount
2.
$250
3.
Add lines 1 and 2.
3.
4.
Minimum standard deduction.
4.
$800
5.
Enter the larger of line 3 or line 4.
5.
6.
Enter the amount shown below for your filing status.
•
Single or Married filing separately— $5,000
6.
•
Married filing jointly or Qualifying
widow(er) with dependent child—$10,000
•
Head of household—$7,300
7.
Standard deduction.
a.
Enter the smaller of line 5 or line 6. If born after January 1, 1941, and not blind, stop here. This is your standard deduction.
Otherwise, go on to line 7b.
7a.
b.
If born before January 2, 1941, or blind, multiply $1,250 ($1,000 if married or qualifying widow(er) with dependent child)
by the number in the
box above.
7b.
c.
Add lines 7a and 7b. This is your standard deduction for 2005.
7c.
Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you
performed. It also includes any amount received as a scholarship that you must include in your income.
Itemized Deductions
Some
individuals should itemize their deductions because it will save them money. Others should itemize because they do
not qualify for the standard deduction. See the discussion under Standard Deduction, earlier, to decide if it would be to your advantage to
itemize deductions.
Medical and dental expenses, some taxes, certain interest expenses, charitable contributions, certain losses, and other miscellaneous
expenses may
be itemized as deductions on Schedule A (Form 1040).
You may be subject to a limit on some of your itemized deductions if your adjusted gross income (AGI) is more than $145,950
($72,975 if you file
married filing separately).
You may benefit from itemizing your deductions on Schedule A (Form 1040) if you:
Cannot take the standard deduction,
Had uninsured medical or dental expenses that are more than 7.5% of your adjusted gross income (see Medical and Dental Expenses,
next),
Paid interest and taxes on your home,
Had large unreimbursed employee business expenses or other miscellaneous deductions,
Had large uninsured casualty or theft losses,
Made large contributions to qualified charities (see Publication 526, Charitable Contributions), or
Have total itemized deductions that are more than the highest standard deduction you can claim.
See the Schedule A (Form 1040) instructions for more information.
Medical and Dental Expenses
You can deduct certain medical and dental expenses you paid for yourself, your spouse, and your dependents, if you itemize
your deductions on
Schedule A (Form 1040).
Table 4-4 shows items that you can or cannot include in figuring your medical expense deduction. More information can be found
in Publication 502,
Medical and Dental Expenses.
You can deduct only the amount of your medical and dental expenses that is more than 7.5% of your adjusted gross income shown
on Form 1040, line
38.
What to include.
Generally, you can include only the medical and dental expenses you paid this year, regardless of when the services
were provided. If you pay
medical expenses by check, the day you mail or deliver the check generally is the date of payment. If you use a pay-by-phone
or online account to pay
your medical expenses, the date reported on the statement of the financial institution showing when payment was made is the
date of payment. You can
include medical expenses you charge to your credit card in the year the charge is made. It does not matter when you actually
pay the amount charged.
Medical Insurance Premiums
You can include in medical expenses insurance premiums you pay for policies that cover medical care. Policies can provide
payment for:
Hospitalization, surgical fees, X-rays, etc.,
Prescription drugs,
Replacement of lost or damaged contact lenses,
Qualified long-term care insurance contracts (subject to additional limits), or
Membership in an association that gives cooperative or so-called free-choice medical service, or group hospitalization and
clinical
care.
You cannot deduct insurance premiums paid with pretax dollars because the premiums are not included in box 1 of Form W-2.
If you have a policy that provides more than one kind of payment, you can include the premiums for the medical care part of
the policy if the
charge for the medical part is reasonable. The cost of the medical portion must be separately stated in the insurance contract
or given to you in a
separate statement.
Medicare Part A.
If you are covered under social security (or if you are a government employee who paid Medicare tax), you are enrolled
in Medicare Part A. The
payroll tax paid for Medicare Part A is not a medical expense. If you are not covered under social security (or were not a
government employee who
paid Medicare tax), you can enroll voluntarily in Medicare Part A. In this situation you can include the premiums you paid
for Medicare Part A as a
medical expense on your tax return.
Medicare Part B.
Medicare Part B is a supplemental medical insurance. Premiums you pay for Medicare Part B are a medical expense. If
you applied for it at age 65 or
after you became disabled, you can include in medical expenses the monthly premiums you paid. If you were over age 65 or disabled
when you first
enrolled, check the information you received from the Social Security Administration to find out your premium.
Prepaid insurance premiums.
Insurance premiums you pay before you are age 65 for medical care after you reach age 65 for yourself, your spouse,
or your dependents, are medical
care expenses in the year paid if they are:
Payable in equal yearly installments, or more often, and
Payable for at least 10 years, or until you reach 65 (but not for less than 5 years).
Meals and Lodging
You can include in medical expenses the cost of meals and lodging at a hospital or similar institution if your main reason
for being there is to
receive medical care.
You may be able to include in medical expenses the cost of lodging (but not meals) not provided in a hospital or similar institution.
You can
include the cost of such lodging while away from home if all of the following requirements are met.
The lodging is primarily for, and essential to, medical care.
The medical care is provided by a doctor in a licensed hospital or in a medical care facility related to, or the equivalent
of, a licensed
hospital.
The lodging is not lavish or extravagant under the circumstances.
There is no significant element of personal pleasure, recreation, or vacation in the travel away from home.
The amount you include in medical expenses for lodging cannot be more than $50 per night for each person. You can include
lodging for a person
traveling with the person receiving the medical care. For example, if a parent is traveling with a sick child, up to $100
per night can be included as
a medical expense for lodging. (Meals are not included.)
Nursing home.
You can include in medical expenses the cost of medical care in a nursing home or a home for the aged for yourself,
your spouse, or your
dependents. This includes the cost of meals and lodging in the home if a main reason for being there is to get medical care.
Do not include the cost of meals and lodging if the reason for being in the home is personal. However, you can include
in medical expenses the part
of the cost that is for medical or nursing care.
Table 4-4. Medical and Dental Expenses Checklist
You can include:
You cannot include:
Bandages
Birth control pills prescribed by your doctor
Capital expenses for equipment or improvements to your home needed for medical care (see Publication 502)
Certain fertility enhancement procedures (see Publication 502)
Certain weight-loss expenses for obesity
Diagnostic devices
Expenses of an organ donor
Eye surgery—to promote the correct function of the eye
Guide dogs or other animals aiding the blind, deaf, and disabled
Special school or home for mentally or physically disabled persons (see Publication 502)
Stop-smoking programs
Transportation for needed medical care
Treatment at a drug or alcohol center (includes meals and lodging provided by the center)
Wages for nursing services (see Publication 502)
Contributions to Archer MSAs (see Publication 969)
Baby sitting and childcare
Bottled water
Diaper service
Expenses for your general health (even if following your doctor's advice) such as:
—Health club dues
—Household help (even if recommended by a doctor)
—Social activities, such as dancing or swimming lessons
—Trip for general health improvement
Flexible spending account reimbursements for medical expenses (if contributions were on a pretax basis) (see Publication 502)
Funeral, burial, or cremation expenses
Health savings account payments for medical expenses (see Publication 502)
Illegal operation or treatment
Life insurance or income protection policies, or policies providing payment for loss of life, limb, sight, etc.
Maternity clothes
Medical insurance included in a car insurance policy covering all persons injured in or by your car
Medicine you buy without a prescription
Nursing care for a healthy baby
Prescription drugs you brought in (or ordered shipped) from another country, in most cases (see Publication 502)
Nutritional supplements, vitamins, herbal supplements, “natural medicines,” etc., unless recommended by a medical practitioner as a
treatment for a specific medical condition diagnosed by a physician
Surgery for purely cosmetic reasons (see Publication 502)
Toothpaste, toiletries, cosmetics, etc.
Teeth whitening
Weight-loss expenses not for the treatment of obesity
Table 4-4. Medical and Dental Expenses Checklist
You can include:
You cannot include:
Bandages
Birth control pills prescribed by your doctor
Capital expenses for equipment or improvements to your home needed for medical care (see Publication 502)
Certain fertility enhancement procedures (see Publication 502)
Certain weight-loss expenses for obesity
Diagnostic devices
Expenses of an organ donor
Eye surgery—to promote the correct function of the eye
Guide dogs or other animals aiding the blind, deaf, and disabled
Special school or home for mentally or physically disabled persons (see Publication 502)
Stop-smoking programs
Transportation for needed medical care
Treatment at a drug or alcohol center (includes meals and lodging provided by the center)
Wages for nursing services (see Publication 502)
Contributions to Archer MSAs (see Publication 969)
Baby sitting and childcare
Bottled water
Diaper service
Expenses for your general health (even if following your doctor's advice) such as:
—Health club dues
—Household help (even if recommended by a doctor)
—Social activities, such as dancing or swimming lessons
—Trip for general health improvement
Flexible spending account reimbursements for medical expenses (if contributions were on a pretax basis) (see Publication 502)
Funeral, burial, or cremation expenses
Health savings account payments for medical expenses (see Publication 502)
Illegal operation or treatment
Life insurance or income protection policies, or policies providing payment for loss of life, limb, sight, etc.
Maternity clothes
Medical insurance included in a car insurance policy covering all persons injured in or by your car
Medicine you buy without a prescription
Nursing care for a healthy baby
Prescription drugs you brought in (or ordered shipped) from another country, in most cases (see Publication 502)
Nutritional supplements, vitamins, herbal supplements, “natural medicines,” etc., unless recommended by a medical practitioner as a
treatment for a specific medical condition diagnosed by a physician
Surgery for purely cosmetic reasons (see Publication 502)
Toothpaste, toiletries, cosmetics, etc.
Teeth whitening
Weight-loss expenses not for the treatment of obesity
Transportation
Amounts paid for transportation primarily for, and essential to, medical care qualify as medical expenses.
Car expenses.
You can include out-of-pocket expenses, such as the cost of gas and oil, when you use a car for medical reasons.
You cannot include depreciation,
insurance, general repair, or maintenance expenses.
Instead of deducting the actual expenses of using your car for medical reasons, for 2005 you can deduct a standard
rate of:
15 cents a mile before September 1, 2005, and
22 cents a mile after August 31, 2005.
You can also include parking fees and tolls. You can add these fees and tolls to your medical expenses whether you
use actual expenses or use the
standard mileage rate.
You can also include:
Bus, taxi, train, or plane fares or ambulance service, and
Transportation expenses of a nurse or other person who can give injections, medications, or other treatment required by a
patient who is
traveling to get medical care and is unable to travel alone.
Do not include transportation expenses if, for purely personal reasons, you choose to travel to another city for an operation
or other medical care
prescribed by your doctor.
Home Improvements
Only reasonable costs to accommodate a home to a person's disabled condition are considered medical care. Additional costs
for personal motives,
such as for architectural or aesthetic reasons, are not medical expenses. Publication 502 contains additional information
and examples, including a
capital expense worksheet, to assist you in figuring the amount of the capital expense that you can include in your medical
expenses. Also, see
Publication 502 for information about deductible operating and upkeep expenses related to such capital expense items, and
for information about
improvements, for medical reasons, to property rented by a person with disabilities.
