Wednesday, January 17, 2007

US Federal Tax Preparation - 2006 Standard Deduction and Personal Exemptions

Standard Deduction Amount
While most taxpayers claim the standard deduction, it may pay you to itemize if you own a home based business. On 2006 returns, the standard amount for single filers is $5,150.00, an increase of $150 over last year. This is also the deduction for married taxpayers who opt to file separately from a spouse. Head of household taxpayers get a $7,7550.00 standard deduction this year, up $250 from 2005's amount.

Married couples who file a joint return get a $300 increase, giving them a $10,300 standard deduction. Qualifying widows and widowers also use this amount.

Personal Exemptions
You, your spouse, and each person you can claim as a dependent are worth $3,300 each. These exemptions are subtracted to reach the lowest possible taxable income amount. This year's exemption amount is $100 more than the previous tax year.

One holdover in this area is for taxpayers who welcomed Hurricane Katrina evacuees into their homes.The hosts might be eligible for additional exemptions. Individuals who put up a displaced person at their residence for at least 60 consecutive days can get an added exemption of $500 per person.

However, this added exemption amount is limited. You can claim exemptions for up to no more that four persons, giving you a potential maximum benefit of $2000. If you claimed any of these displaced persons on your 2005 return, you cannot claim them again this year. The total allowable dollar amount for both 2005 and 2006 cannot exceed the $2,000 limit. Full details can be found in the Form 1040 and 1040A instruction books.

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