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Filing requirements, standard deductions for dependent taxpayers
Sometimes you might file a return, for example, to get a refund of withheld money, even though you can be claimed as a dependent on someone else's return. In this case, a dependent taxpayer who is younger than 65 and not blind can take as a standard deduction the greater of $850 or his or her earned income plus $300. This deduction amount, however, cannot exceed the basic standard deductions for the dependent taxpayer's filing status. As with the basic standard deduction amounts, older and visually impaired taxpayers who also are dependents are allowed larger deduction amounts. If you can be claimed as a dependent of another taxpayer, you still have to file if you meet certain earning thresholds. Both single and married dependents must file a tax return if any of the following apply: more than $850 in unearned income; more than $5,150 in earned income; or gross income (a combination of earned and unearned money) that is larger than at least $850 or the gross amount plus $300. In addition, older taxpayers who can be claimed as dependents are allowed to earn more before they must file a return:  | Earnings thresholds that require filing
by dependent taxpayers age 65+ or visually impaired | |
| | | | | Single or head of household | 65 or blind | $850 or earned income plus $300 | $1,250 | | Single or head of household | 65 and blind | $850 or earned income plus $300 | $2,500 | | Married filing jointly or qualifying widow(er) | 65 or blind | $850 or earned income plus $300 | $1,000 | | Married filing jointly or qualifying widow(er) | 65 and blind | $850 or earned income plus $300 | $2,000 |
Itemized deductions
All taxpayers may choose to itemize deductions and claim that amount if it is larger than their allowable standard deduction amount. You must file Form 1040 and Schedule A to itemize. Some itemized deductions are limited based on a taxpayer's adjusted gross income. For 2007, the following limits apply to itemized deductions: | | Limits on itemized deductions | | | | Amount exceeding 7.5 percent of AGI is deductible. | | Fully deductible for loans totaling $1 million or less on your primary residence or second home | | Generally deductible for loans up to $100,000 that are secured by your home | | Most are fully deductible as long as the gift amount does not exceed 50 percent of AGI | | Deductible after subtracting insurance reimbursements, 10 percent of your AGI and $100 | | Amount exceeding 2 percent of AGI is deductible |
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In addition, overall itemized deductions also could be reduced if a taxpayer's AGI exceeds a certain amount, adjusted annually for inflation. For 2007 returns, the reduction of total itemized deductions begins for a taxpayer with an AGI of $150,500. This income level applies to single, head of household and married filing jointly taxpayers. Taxpayers who are married but file separate returns will see their itemized deductions reduced on AGI of $75,250 or more. |