Standard Deduction

[LindaC3]

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?

[VolvoGirl · Accepted solution]

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

[LindaC3]

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?

[NCperson]

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.

[VolvoGirl]

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

[NCperson]

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.

[NCperson]

@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)

[VolvoGirl]

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-workshe... 

[LindaC3]

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