11.2 Filing Status, Dependents, and Deductions
Key Takeaways
- Filing status set on the last day of the year determines the rate schedule, standard deduction, and many credit phaseouts, and must be selected before any tax is computed.
- The 2026 standard deduction is $16,100 for single, $32,200 for married filing jointly, and $24,150 for head of household; use supplied amounts on the exam rather than memorizing them.
- Dependency turns on the qualifying-child tests (relationship, age, residency, support, joint-return) or qualifying-relative tests (relationship/household, gross-income, support), and a dependent is not automatically a qualifying person for head of household.
- After AGI a taxpayer claims the GREATER of the standard deduction or allowable Schedule A itemized deductions; they are alternatives, never added together.
- The qualified business income (QBI) deduction is a separate taxable-income deduction, not a Schedule A item and not an above-the-line adjustment.
Filing Status and Deductions on Form 1040
REG individual questions often begin before any tax rate is applied. The correct filing status fixes which rate schedule, standard deduction, and phaseout assumptions belong in the calculation. The 2026 blueprint expressly includes filing status, the relationships that meet the definition of a dependent, deductions from AGI, and review of Form 1040 support for taxable income.
Filing Status Sequence
Work in a disciplined order. First decide whether the taxpayer is married on the last day of the year (or a special rule treats them as unmarried). Then test the favorable statuses before defaulting to single. Head of household (HoH) turns on being considered unmarried, paying more than half the cost of keeping up a home, and having a qualifying person live there for more than half the year (a dependent parent need not live with the taxpayer).
| Status | What to verify | Common REG trap |
|---|---|---|
| Married filing jointly (MFJ) | Valid marriage; both spouses sign | Joint and several liability follows the joint return absent innocent-spouse relief |
| Married filing separately (MFS) | Married, not filing jointly | Many credits (earned income, education, adoption) are reduced or barred |
| Head of household | Considered unmarried, >50% home cost, qualifying person | A dependent is NOT automatically a qualifying person for HoH |
| Qualifying surviving spouse | Spouse died in one of the two prior years; dependent child | Available only the two years after the year of death |
| Single | No other status fits | Never choose single before testing HoH |
Dependents as a Tax Workflow
Dependency questions are fact-sorting. A qualifying child must satisfy five tests: relationship, age (under 19, or under 24 if a full-time student, or any age if permanently disabled), residency (same home more than half the year), support (the child did not provide more than half of own support), and joint-return (the child did not file a joint return except to claim a refund). A qualifying relative must satisfy relationship-or-household-member, a gross-income test (the dependent's gross income is below the indexed limit the question supplies), a support test (taxpayer provides more than half), and the not-a-qualifying-child test.
The exam uses dependents as distractors. A child can be a qualifying child of one parent under the tie-breaker rules (the parent with whom the child lived longer, then higher AGI). A person may be your dependent yet still not be the qualifying person that unlocks HoH. And claiming someone as a dependent never makes that dependent's own income disappear from their return.
Standard, Itemized, and Other Deductions
After AGI, the taxpayer claims the greater of the standard deduction or allowable Schedule A itemized deductions. For 2026 the standard deduction is $16,100 (single), $32,200 (MFJ), and $24,150 (HoH), but use the figure the question gives you. Itemized categories include medical expenses (only the excess over 7.5% of AGI), state and local taxes (capped), qualified residence interest, investment interest, charitable contributions, and casualty losses in a federally declared disaster. Personal living costs are not deductible merely because they are necessary.
The qualified business income (QBI) deduction under IRC Section 199A is different from everything on Schedule A. It is generally up to 20% of qualified business income from a pass-through (sole proprietorship, partnership, or S corporation), is not an above-the-line adjustment, and is not a Schedule A itemized deduction. It is a separate deduction subtracted in arriving at taxable income, and a taxpayer can claim both the standard deduction AND the QBI deduction in the same year.
For higher-income owners above the supplied taxable-income threshold, the deduction is the lesser of 20% of QBI or a wage-and-property limit (the greater of 50% of W-2 wages, or 25% of W-2 wages plus 2.5% of the unadjusted basis of qualified property), and a specified service trade or business (SSTB -- health, law, accounting, consulting, financial services) phases out entirely above the upper threshold. Below the threshold, none of those limits apply and the full 20% is generally available.
Watch the boundary between deduction categories. A self-employed taxpayer's health insurance premiums are an above-the-line adjustment, but unreimbursed employee medical premiums fall into the Schedule A medical category subject to the 7.5%-of-AGI floor. State income taxes are itemized (subject to the SALT cap); federal income taxes are never deductible.
Review Approach
For a simulation, build taxable income in layers:
- Select filing status from the family and household facts.
- Decide who is a dependent and for which benefit (credit, HoH qualifying person, or both).
- Compare the standard deduction with allowable itemized deductions when amounts are supplied, and take the greater.
- Apply the QBI deduction separately, after the standard-or-itemized choice.
- Reconcile taxable income back to Form 1040 and Schedule A support.
This ordering prevents the classic REG mistakes: putting an HSA contribution on Schedule A, treating QBI as an itemized deduction, adding the standard and itemized deductions together, deducting federal income tax, or assuming any parent with a child automatically files as head of household. Because dependency and filing status also feed the credits worked in the next section, errors here propagate: a misclassified dependent can wrongly grant or deny a child tax credit, and the wrong filing status pulls the wrong standard deduction and the wrong rate schedule into every later computation.
A taxpayer is unmarried at year-end, paid more than half the cost of maintaining the home, and the taxpayer's qualifying child lived in that home for more than half the year. Which filing status should be tested before defaulting to single?
A single taxpayer's facts supply a 2026 standard deduction of $16,100 and allowable Schedule A itemized deductions of $18,300, with no special limitation stated. What deduction is used in computing taxable income?