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 exempt Puerto Rico source income). This allocation decreases the standard deduction and offsets exempt income. This adjustment must be made before entering the standard deduction on Form 1040, line 12.

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