Allocation of Standard Deduction

For Puerto Rico taxpayers who do not itemize, the standard deduction must be allocated based on the ratio of gross income subject to U.S tax to total gross income from all sources (including excluded Puerto Rico source income). This allocation decreases the standard deduction and offsets excluded income. This adjustment must be made before entering the standard deduction on Form 1040, line 12e.

To compute the standard deduction, use the Worksheet from Publication 1321 for Puerto Rico Filers with Excluded Income under Section 933 Who Do Not Itemize Deductions.