Which of the statements regarding the standard deduction is correct?\na. Some taxpayers may qualify for two types of standard deductions.\nb. The basic standard deduction is indexed for inflation but the additional standard deduction is not.\nc. The standard deduction may be taken as a for AGI deduction.\nd. The standard deduction is not available to taxpayers who are dependents.
The Correct Answer and Explanation is :
The correct statement is:
a. Some taxpayers may qualify for two types of standard deductions.
Explanation:
The standard deduction is an amount that taxpayers can subtract from their taxable income, reducing the amount of income that is subject to tax. It is available to individuals who do not itemize their deductions, and the amount varies based on filing status (single, married filing jointly, etc.). The correct answer relates to the fact that taxpayers may qualify for two types of standard deductions, typically referred to as the basic standard deduction and the additional standard deduction.
- Basic Standard Deduction: This is the general amount available to most taxpayers based on their filing status.
- Additional Standard Deduction: Some taxpayers qualify for an additional standard deduction, which is often related to age or blindness. For instance, taxpayers who are age 65 or older, or who are blind, may be eligible for this additional amount.
Evaluating the Other Statements:
- b. The basic standard deduction is indexed for inflation but the additional standard deduction is not.
This is incorrect. Both the basic and the additional standard deduction amounts are indexed for inflation. They are adjusted annually based on changes in the cost of living. - c. The standard deduction may be taken as a for AGI deduction.
This is incorrect. The standard deduction is a from AGI (Adjusted Gross Income) deduction. It is subtracted after calculating the AGI, which means it reduces taxable income, not the AGI directly. - d. The standard deduction is not available to taxpayers who are dependents.
This is incorrect. Dependents can still claim a standard deduction, but the amount may be limited. For dependents, the standard deduction is typically the greater of $1,150 or their earned income plus $400, up to the basic standard deduction for their filing status. However, they cannot claim the full standard deduction available to other taxpayers.