$400 added to Wages if under standard deduction

[DrMarsha]

I am working on a tax return for a dependent that made under the standard deduction. I am wondering why they add $400 on to their wages if they made under the standard deduction? Curious as to the $400 amount. Thanks!

[xmasbaby0]

The standard deduction amount for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of $1,100 or the sum of $350 and the individual’s earned income (not to exceed the regular standard deduction amount).

[VolvoGirl]

Yes that's right.  Is it $400 now?

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 12,950)

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

[dmertz]

Yes, $400 for 2022.  See IRS Pub 17 page 9.

[DrMarsha]

Any idea why there is any additional amount added? What purpose does $400 serve?

[xmasbaby0]

@dmertz @VolvoGirl Correcting my information right now!  Thanks!

[dmertz]

@DrMarsha , you would have to ask Congress since they wrote the law ($250 in section 63(c)(5), adjusted for inflation).  My guess is just to allow some deduction for income beyond earned income (overall limited to the regular standard deduction amount), and together to not punish dependents for earning income.

[xmasbaby0]

@DrMarsha By adding the $400 to the standard deduction the amount of income your dependent is taxed on is LESS.   Standard deduction is the amount of income you do not pay tax on.

[Hal_Al]

Q. What purpose does $400 serve?

A. To allow your dependent to have up to $400 of unearned income, in addition to his earned income, before he has to file a tax return.