The Bottom Line

The standard deduction is a beautiful thing in the world of personal income taxes. According to the IRS, the standard deduction is “a dollar amount that reduces the amount of income on which you are taxed.” Here are my top three reasons why:

1. $5,450. That’s how much less income that you (U.S. citizen/permanent resident, single filer you) can be taxed on in the blink of an eye with this little puppy for 2008. For the eternally low-funded college student like many of us out there, the ability to not be taxed on a substantial amount of your income, thereby increasing your refund check from the IRS, is a wonderful power to have. Even if you were a hotshot i-banker this summer, that amount can represent upwards of 20%, if not more, of your summer wages that magically go “poof!”

2. Simplicity. The 1040 form allows users to claim itemized deductions, the calculations for which can complicate your life unnecessarily. Those itemized deductions are the grown-up analog of the standard deduction, or rather, the income-reducing option that an individual can take, should their itemized deductions exceed the $5,450. If these itemized deductions exceed that amount, then the individual ought to use the 1040 and run the itemized calculations.

3. No reason or qualification, except to breathe. Really, there’s nothing that you have to do to qualify for this deduction. All you have to do is exist in the eyes of the IRS and file a tax return. Not that bad, right? Towards the end of the form will be the line that lets you take this deduction, and if you read that line closely, you just take the free money that the IRS is dangling in front of you and run with it!

I add this to every post, but seriously, got a question? Email bizexpert[at]dailypennsylvanian[dot]com. There’s only a couple weeks left in the blogging schedule and still a thousand volumes of the Internal Revenue Code to go, so if there’s a particular topic you’d like to read about…email! I don’t bite.

Angela Hu Uncategorized ask the taxpert, standard deduction, tax nirvana, Taxes