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1040EZ’s different deduction

By Kay Bell · Bankrate.com
Tuesday, December 3, 2013
Posted: 3 pm ET

Form 1040EZ is, as the alphabetic suffix indicates, the easiest of the three individual tax returns.

It also has some limits on just who can file it.

You can't claim any dependents. You and your spouse, if married, must be younger than 65. And you can't earn more than $100,000 or have interest income that exceeds $1,500.

The 1040EZ also requires that you claim the standard deduction.

Standard deduction differences

The standard deduction amount you'll see on the shortest of the 1040 forms, however, is a different amount than you'll find on the 1040A or 1040.

Bankrate Taxes Blog reader Rachel noted the inconsistency. She dropped me an email wondering why line 5 of Form 1040EZ says, "If no one can claim you (or your spouse if a joint return), enter $10,000 if single; $20,000 if married filing jointly."

"That's almost $4,000 higher than the $6,100 your article states is the standard deduction for single filers," she wrote. "Can you explain this?"

Good eye, Rachel.

But before Rachel or you decide to ditch one of the longer 1040s for the 1040EZ and its apparently larger standard deduction, let's take a closer look.

EZ math

The shortest tax return's standard deduction amount actually is the same as found on the other two 1040s. The EZ just presents it differently.

In addition to getting to claim deductions -- itemized or, in this case, standard -- taxpayers also are allowed a personal exemption amount they can subtract from their income.

There is no place on Form 1040EZ to enter the exemption amount. Rather, the shortest individual tax return simply combines the standard deduction and exemption amounts.

The standard deduction for 2013 tax returns, regardless of the form used, is indeed $6,100. The personal exemption is $3,900. Add those two amounts and you get the $10,000 shown on line 5.

For jointly filing married couples, the Form 1040EZ math is the usual $12,200 standard deduction amount plus $3,900 per spouse (or $7,800), which comes to the form's $20,000 figure for couples.

You can find the mathematical explanation on the Form 1040EZ worksheet you must fill out if someone can claim you as a dependent. But if that situation doesn't apply to you, then you wouldn't see it and, like Rachel, you'd wonder what's up with the different deduction amounts.

The Internal Revenue Service should have also included the standard deduction amount explanation on line 5 where every 1040EZ taxpayer would see it. But I'm thankful that conscientious Rachel asked the question so I could do the explaining for her and other curious readers.

You can find out more about Form 1040EZ and the other two tax returns in Bankrate's tax tip on picking the proper return. You also can take a look at the tax return forms and other IRS publications and documents in our Tax Forms section.

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You also can follow me on Twitter: @taxtweet.

Veteran contributing editor Kay Bell is the author of the book "The Truth About Paying Fewer Taxes" and co-author of the e-book "Future Millionaires' Guidebook."

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9 Comments
Jian
April 06, 2014 at 4:09 pm

With 1040EZ, single can deduct $10,000 from the income; 1040 can only deduct $3,900, if no other deduction.

How can you use 1040 to deduct $10,000 as with 1040EZ?