topic Standard Deduction in Deductions & credits

Standard Deduction

LindaC3 — Mon, 26 Apr 2021 00:38:34 GMT

I am doing a tax return for my daughter. Her AGI is $10,763. Her standard deduction is $2,066 so she has to pay tax. Shouldn't her standard deduction be $12,400? Why would Turbotax have it at $2,066?

Re: Standard Deduction

VolvoGirl — Mon, 26 Apr 2021 00:40:53 GMT

Is she a dependent? What kind of income did she have?

The Standard Deduction for an individual for whom an exemption can be claimed on another person's tax return is limited to the greater of:

…..$1,100 or

…..Your earned income for the year + $350 (but not more than 12,400)

So you would get a minimum of $1,100.

See Table 8 Standard Deduction worksheet for Dependents on Page 25

https://www.irs.gov/pub/irs-pdf/p501.pdf

Or the 1040 worksheet on page 32

https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

Re: Standard Deduction

LindaC3 — Mon, 26 Apr 2021 00:46:34 GMT

Yes, I claim her as a dependent. She had $1,716 in income and $9,067 in unemployment. I thought anything less than the standard deduction of $12,400 and she would get all her tax paid in back.

I claim my son as a dependent but he got the $12,400 deduction. He had $13, 168 from wages. Is that what is making the difference?

Re: Standard Deduction

NCperson — Mon, 26 Apr 2021 01:18:02 GMT

yeah, this unemployment causes a problem for those that CAN be claimed as a dependent.

please review @VolvoGirl 's formula for the standard deduction.

note that unemployment is considered 'UNEARNED' - and that is causing this issue - as the standard deduction formula is EARNED income + 350,

$1716 + $350 should be the standard deduction or $2,066.

Re: Standard Deduction

VolvoGirl — Mon, 26 Apr 2021 01:26:02 GMT

@NCperson How does dependent work with unemployment? Don't they get the exclusion?

Re: Standard Deduction

NCperson — Mon, 26 Apr 2021 01:42:10 GMT

they get the exclusion, but not for the purpose of calculating the standard deduction.

I just dummied a return and $1716 of wages and $19267 of unemployment as @LindaC3 first post suggests the $9067 is after the exclusion given how the math is working out

With unemployment of $19,267, less $10,200 for the exclusion less standard deduction of $2066, AGI is $10,783. Tax is $873!

Standard deduction is EARNED income of $1716 Plus $350 or $2066.

I've seen a few others like this and it's one of the unintended consequences of the $10,200 exclusion if you CAN BE a dependent of someone else.

Re: Standard Deduction

NCperson — Mon, 26 Apr 2021 13:44:29 GMT

@VolvoGirl - I just ran into another return where tax payer received SS and was on unemployment.... same thing occured... the assessment of how much of the social security is taxable is based on the gross amount of the unemployment (meaning prior to the $10,200 exclusion)

Re: Standard Deduction

VolvoGirl — Mon, 26 Apr 2021 14:29:05 GMT

Looks like it is. I think I saw a FAQ on it. But this was just posted by Hal https://ttlc.intuit.com/community/tax-credits-deductions/discussion/social-security-benefits-worksheet-miscalculates/00/2232197

Re: Standard Deduction

LindaC3 — Mon, 26 Apr 2021 21:14:45 GMT

Thank you both so much for your answers! It helped me understand what was going on. 😃