Standard Deduction This chart provides the standard deduction amounts for tax year 2018. Standard Deduction Chart for Most People* If the taxpayer s filing status is... Your standard deduction is... Single or married filing separate return $12,000 Married filing joint return or qualifying widow(er) with dependent child $24,000 Head of household $18,000 *Don t use this chart if the taxpayer was born before January 2, 1954, or is blind, or if someone can claim the taxpayer as a dependent (or their spouse if married filing jointly). (See the chart on the following page.) Persons Not Eligible for the Standard Deduction Your standard deduction is zero and you should itemize any deductions you have if: Your filing status is married filing separately, and your spouse itemizes deductions on his or her return, You are filing a tax return for a short tax year because of a change in your annual accounting period (out of scope), 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 and resident alien during the year (out of scope). If you are a nonresident alien who is married to a U.S. citizen or resident alien 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. Note: If you can be claimed as a dependent on another taxpayer s return (such as your parents return), your standard deduction may be limited. F-1
Standard Deduction (continued) Standard Deduction Chart for People Born Before January 2, 1954, or Who are Blind Check the correct number of boxes below. Then go to the chart. You: Born before January 2, 1954 Blind Your spouse, if claiming spouse s exemption: Born before January 2, 1954 Blind Total number of boxes checked IF your filing status is... AND the number in box above is... THEN your standard deduction is... Single 1 $13,600 2 $15,200 Married filing jointly or Qualifying widow(er) with dependent child Married filing separately Head of household 1 $25,300 2 $26,600 3 $27,900 4 $29,200 1 $13,300 2 $14,600 3 $15,900 4 $17,200 1 $19,600 2 $21,200 *If someone else can claim you (or your spouse if filing jointly) as a dependent, use standard deduction worksheet for dependents. Standard Deduction Worksheet for Dependents Use this worksheet only if someone else can claim you (or your spouse if filing jointly) as a dependent. Check the correct number of boxes below. Then go to the worksheet. You: Born before January 2, 1954 Blind Your spouse, if claiming spouse s exemption: Born before January 2, 1954 Blind Total number of boxes checked 1. Enter your earned income (defined below). If none, enter -0-. 2. Additional amount. 2. $350 3. Add lines 1 and 2. 3. 4. Minimum standard deduction. 4. $1,050 5. Enter the larger of line 3 or line 4. 5. 6. Enter the amount shown below for your 6. filing status. Single or Married filing separately $12,000 Married filing jointly $24,000 Head of household $18,000 7. Standard deduction. a. Enter the smaller of line 5 or line 6. If born 7a. after January 1, 1954, and not blind, stop here. This is your standard deduction. Otherwise, go on to line 7b. b. If born before January 2, 1954, or blind, 7b. multiply $1,600 ($1,300 if married) by the number in the box above. c. Add lines 7a and 7b. This is your standard 7c. deduction for 2018. Earned income includes salaries, wages, tips, professional fees, and taxable scholarship and fellowship grants. See Tab I, Earned Income Credit, for a list of earned income. 1. F-2
Interview Tips Itemized Deductions These interview tips will assist you in determining whether a taxpayer s itemized deductions are more than their standard deduction amount. It may be more advantageous for a taxpayer to itemize their deductions if the amount is larger than the allowable standard deduction amount. 1 2 3 4 Do you have expenses in the following categories: medical and dental expenses, taxes you paid, home mortgage interest you paid, gifts to charity, gambling losses and expenses incurred in gambling activities (to the extent of gambling winnings) and work related expenses for disabled individuals that enables them to work. Note: Casualty and theft losses are beyond the scope of VITA/TCE. Were the medical and dental expenses paid by an employer under a pre-tax plan (not included in box 1 of the taxpayer s Form W-2) or were the expenses reimbursed by an insurance company? Were the medical and dental expenses more than 7.5% of your adjusted gross income? Note: You can include medical and dental bills you paid for: Yourself and your spouse All dependents you claim on your return Your child whom you don t claim as a dependent because of the rules for children of divorced or separated parents Any person you could have claimed as a dependent on your return except that person received $4,150 or more of gross income or filed a joint return Any person you could have claimed as a dependent except that you, or your spouse if filing jointly, can be claimed as a dependent on someone else s 2018 return Were the following taxes you paid imposed on you: state and local general sales tax, state or local income tax, real or personal property taxes? Note: The total amount of these taxes is limited to $10,000 ($5,000 MFS) per return. If YES, go to Step 2. If NO, generally speaking, you should take the standard deduction if eligible. For further explanation see exceptions in Publication 17, Standard Deduction chapter. If YES, you can t deduct reimbursed expenses. Go to Step 4. If NO, you can claim these expenses. Go to Step 3. If YES, you can claim qualified expenses. Go to Step 4. If NO, you can t deduct these expenses. Go to Step 4. If YES, go to Step 5. If NO, you can t claim this expense as a deduction because you weren t obligated to pay the taxes. Go to Step 6. 5 6 Did you pay these taxes during this tax year? If YES, you can claim these expenses and go to Step 6. If NO, you can t deduct taxes for this year that were paid in another year. Go to Step 6. Are you legally liable for a home mortgage loan? If YES, go to Step 7. If NO, you can t take an interest expense for a mortgage for which you aren t legally liable. Go to Step 12. F-3
Interview Tips Itemized Deductions (continued) 7 8 9 10 11 12 13 14 Was the mortgage a secured debt on a main or second home? Did you pay the mortgage interest in this tax year? Did you take out the mortgage on or before October 13, 1987? Did you pay points to obtain a home mortgage (on a main home or second home or home improvement loan or to refinance your home)? Did you have home equity interest that was used to buy, build, or improve your home? Did you make a cash contribution to a qualified organization? Did you make a noncash donation to a qualified organization? Note: Generally the value of a donation is the lesser of your cost or fair market value. Is the total of all noncash donations $500 or less? If YES, go to Step 8. If NO, you can t take an interest expense. Go to Step 11. If YES, go to Step 9. If NO, you can t take the mortgage interest deduction. Go to Step 11. If YES, your mortgage interest is fully deductible. Go to Step 10. If NO, follow the flowchart, Is My Home Mortgage Interest Fully Deductible in Publication 17 to determine what is deductible. Go to Step 11. If YES, follow the Are My Points Fully Deductible This Year flowchart in Publication 17 and then go to Step 11. See Note 1. If NO, go to Step 11. If YES, your home equity interest is deductible. If NO, go to Step 12. If YES, you must have a written record from that particular organization, and then go to Step 13. If NO, go to Step 13. If YES, advise the taxpayer that generally he or she must have a written receipt from that particular organization. Go to Step 14. See Note 2. If NO, Go to Step 14 If YES, see Publication 17 for more details. If NO, this is beyond the scope of VITA/TCE. Refer taxpayer to a professional tax preparer. Note 1: If you refinanced in an earlier year, and weren t eligible to take all the points in that year, you can add in this year s portion of those prior year points. Note 2: For noncash donations less than $250, you are not required to have a receipt where it is impractical to get one (for example if you leave property at a charity s unattended drop site). F-4
Schedule A Itemized Deductions TaxSlayer Navigation: Deductions from Federal Section>Itemized Deductions>Medical and Dental Expenses If MFS and spouse itemizes, taxpayer must also itemize. Standard deduction can t be used. It doesn t matter which spouse files first. Select to force itemized deduction. Select to enter medical expenses. Select to enter taxes not entered elsewhere in the software. Bandages Birth control pills prescribed by your doctor Body scan Braille books Breast pump and supplies Capital expenses for equipment or improvements to your home needed for medical care (see Worksheet A, Capital Expense Worksheet, in Pub. 502) Diagnostic devices Expenses of an organ donor Eye surgery (to promote the correct function of the eye) Fertility enhancement, certain procedures Guide dogs or other animals aiding the blind, deaf, and disabled Hospital services fees (lab work, therapy, nursing services, surgery, etc.) Lead-based paint removal Legal abortion Legal operation to prevent having children such as a vasectomy or tubal ligation Long-term care contracts, qualified Meals and lodging provided by a hospital during medical treatment Medical services fees (from doctors, dentists, surgeons, specialists, and other medical practitioners) Medicare Part D premiums Schedule A Deductible and Non Deductible Medical Expenses You can include: You can t include: Medical and hospital insurance premiums Nursing services Oxygen equipment and oxygen Part of life-care fee paid to retirement home designated for medical care Physical examination Pregnancy test kit Prescription medicines (prescribed by a doctor) and insulin Psychiatric and psychological treatment Social security tax, Medicare tax, FUTA, and state employment tax for worker providing medical care (see Wages for nursing services below) Special items (artificial limbs, false teeth, eyeglasses, contact lenses, hearing aids, crutches, wheelchair, etc.) Special education for mentally or physically disabled persons 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 Weight loss, certain expenses for obesity Baby sitting and childcare Bottled water Contributions to Archer MSAs (see Pub. 969) 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 pre-tax basis) Funeral, burial, or cremation expenses Health savings account payments for medical expenses Operation, treatment, or medicine that is illegal under federal or state law 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 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 Toothpaste, toiletries, cosmetics, etc. Teeth whitening Weight-loss expenses not for the treatment of the treatment of obesity or other disease You can t include in medical expenses amounts you pay for controlled substances that aren t legal under federal law, even if such substances are legalized by state law. F-5
Schedule A - Itemized Deductions (continued) Note: Medical and dental floor percentage is 7.5%. Some senior residences have an amount in the monthly cost which is a medical expense. F-6
Schedule A - Taxes You Paid The itemized deduction for state and local taxes is limited to $10,000 ($5,000 MFS) per return. *State and Local Tax amounts are automatically pulled from W-2, 1099, W-2G, and Estimates PLEASE DO NOT include any of these amounts in any of the boxes below or your calculations will NOT be correct. Enter amount paid with last year s state return and any other state and local income tax payments not entered elsewhere. Click here to open the sales tax worksheet. Enter real estate taxes that are reported on Form 1098 with the mortgage interest on the mortgage interest screen. Enter vehicle license registration fee if based on value under Personal Property taxes. If taxpayers purchased or sold a home in the tax year, they may not be able to deduct all Real Estate Taxes. See Publication 17, Real Estate Taxes, for more information. Taxes you cannot deduct: utilities, fees/licenses (drivers, marriage, dog); assessments for improvements that increase property value; assessments for services to the property (sewer, trash collection, etc.). Note: In general, whether a taxpayer is allowed a deduction for the prepayment of state or local real property taxes in 2018 depends on whether the taxpayer makes the payment in 2018 and the real property taxes are assessed prior to 2019. A prepayment of anticipated real property taxes that have not been assessed prior to 2019 are not deductible in 2018. State or local law determines whether and when a property tax is assessed, which is generally when the taxpayer becomes liable for the property tax imposed. F-7
Schedule A - Itemized Deductions (continued) If the taxpayer has a large amount of nontaxable income, calculate their sales tax deduction using the IRS sales tax deduction calculator. See the link to the IRS sales tax deduction calculator at the bottom of the page.the calculator adds nontaxable income to AGI to give the taxpayer a larger sales tax deduction. Use the override button to enter the amount calculated. Note: If using the override feature, leave all fields on this screen blank. If not using the override feature, enter the ZIP code and number of days for TaxSlayer to calculate the deduction. Leave these blank if you want the software to use the default rates. If not using the override feature, enter sales tax here for large items (such as a car) if the taxpayer purchased any during the year. Link to the IRS sales tax deduction calculator. F-8
Schedule A - Itemized Deductions (continued) Select for mortgage interest reported on Form 1098. Enter amount from Form 1098, box 1 (and box 2, if applicable). See Legislative Extenders tab Note: The deduction for home equity debt is disallowed as a mortgage interest deduction unless the home equity debt was used to build, buy, or improve the taxpayer s qualified residence. If there are multiple mortgages, make additional Schedule A Interest entries. For mortgages entered into after December 15, 2017, the amount of interest you can deduct is on no more than $750,000 of debt used to buy, build, or improve your principal home and a second home ($375,000 in the case of married taxpayers filing separate tax returns) for tax years 2018 through 2025. Points from refinancing must be spread over the life of the mortgage unless used to remodel (see Publication 17, Points). Enter loan origination fee from closing statement as points not reported on Form 1098 if not included as points on Form 1098. These types of donations are not deductible: political; country club/fraternal lodge; chambers of commerce; raffle, bingo, or lottery tickets; tuition; value of time/services; gifts to lobby groups; civic leagues, social clubs; labor unions, homeowners association dues. F-9
Schedule A - Itemized Deductions (continued) Note: Enter amounts given by cash or check under Cash Gifts to Charity. The 30% & 60% refer to the percentage of your AGI that can be deducted this year. See Publication 17 for definitions. Enter the value of noncash items (including miles driven in service to a charity) donated under Non-Cash Gifts to Charity. Be careful to list them separately. If Non-Cash contributions are greater than $500 Form 8283 must be completed and this form is out of scope. Schedule A - Miscellaneous Deductions Certain qualified contributions made for relief efforts in disaster areas are not subject to the AGI limitation. See IRS Publication 976, Disaster Relief. Gambling losses and expenses incurred in gambling activities up to the amount of winnings are deducted here. You can t deduct gambling losses that are more than the taxpayers winnings. Nondeductible expenses: Commuting; home repair; rent; loss from sale of home; personal legal expenses; lost/ misplaced cash or property; fines/penalties. No miscellaneous itemized deductions will be allowed for job expenses and certain miscellaneous deductions subject to the 2% limitation. F-10
Qualified Business Income Deduction For tax years beginning after 2017, Taxpayers that report a profit on Schedule C may be entitled to a deduction up to 20%. The deduction will be subject to various limitations This deduction is claimed on Form 1040, and can be taken in addition to the standard deduction or itemized deductions Only the 20% deductions for Sole proprietors will be in scope for VITA/TCE See Publication 535, Business Expenses for additional information. F-11